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TAKING STOCK
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The dawn of 1999
seems the perfect time to reflect on companies
that make a fair penny fixing that bugaboo known
as the year 2000 problem. There are 12 months
left to tackle this ticking time bomb, and some
cleanup work afterward. But what then? Fairfax-based Information Analysis Inc. (Nasdaq, IAIC: $1.25) exploded when it took on year 2000 work. The company traces its beginnings to modernizing computer systems, mostly for government agencies. In early 1997, the company obtained proprietary software -- named Unicast -- that helped automate the modernization process. "You'd plug in Cobol I at the top, and Cobol II would come out at the bottom," explains Neal H. Sanders, the company's communications vice president. |
| It didn't take long to realize there was money in using the same software to translate a two-digit code year into a four-digit year. The company created specific Unicast programs to change year 2000 code in outdated, nonstandard computer languages. "We have been successful because we deal with code that's more difficult to do in-house than if you had a standard, IBM-mainframe kind of program," Sanders says. |
The plan was to sell the software and let companies do their own code conversions. But clients wanted to outsource the work, so Information Analysis started hiring.
In the summer of 1997, Information Analysis' stock was flying high. "If you had year 2000 in your business plan, [the stock] went up," says Sanders, "no matter whether you were making a profit." Information Analysis peaked at a heady $31 per share, Sanders says. Year 2000 business was booming. In the fourth quarter of that year, $1.4 million of Information Analysis' $2.9 million in revenues was year-2000 related.
In the third quarter of 1998, year 2000 products and revenues fell to $1.3 million. The company says the decline was the result of sales below forecast, the reversal of an earlier software sale and pouring resources into completing fixed-price contracts. The company lost money on revenues of $2.8 million in the third quarter, compared with $1.8 million in revenues for the same period in 1997.
Analysts now seem to have lost interest; none currently tracks the Fairfax company. But to explain what happens next, Darren Cohen of Northern Virginia's Freidman Billings Ramsey points to Keane Inc. in Boston (AMEX, KEA: $30.38), which is also heavy into the year 2000 business. "They started as a supplemental staffing company. They saw Y2K as a growth opportunity and shifted their business model," Cohen says, just as Information Analysis did. That move, Cohen says, gave Keane an "in" with new clients. "They used Y2K as a trojan horse to get inside these companies and prove themselves."
Sanders says the story is the same for Information Analysis. "For 17 years this was a migration and modernization company, so it will go back to what it was before," he says.
The company has 50 year-2000 clients, and Sanders expects Information Analysis to continue those relationships. "Commercial organizations we had not worked with before -- and would not have worked with but for the year 2000 problem -- now think of us kindly because we helped solve their problem."
Leigh
Anne Larance
Senior Editor
© JANUARY 1999, VIRGINIA BUSINESS
MAGAZINE