IBM Shares Plunge as Millennium Bug Hits Sales

Strategic Insights -

IBM, the computer company, revealed that the "millennium bug" was slowing sales of its flagship mainframe computers, causing its shares to drop by nearly a fifth and wiping $37 billion from its stock market value. The news devastated stock market confidence and marked the end of a brief technology-led rally on Wall Street. The company's woes contrasted with the stellar results of other industry leaders, including Microsoft and Sun Microsystems, which said the Y2K problem had not affected their sales.

Key Takeaways:

  • IBM's mainframe sales were off by about 40% in the third quarter and were expected to remain soft through the first quarter of next year.
  • The company's shares dropped $22 1/4 to trade at $90 1/2 early in the afternoon in New York, wiping $37 billion from its stock market value.
  • Other US technology stocks were also affected, following a strong rally the day before.
  • The Year 2000 computer problem has caused companies to delay spending on traditional information technology systems.
  • Spending on new applications and internet-related systems appears to be largely untouched by the year-end date problem.
  • SAP, the leading provider of enterprise resource planning software, reported disappointing results on Wednesday.
  • PeopleSoft, a US competitor of SAP, reported a sharp drop in sales earlier in the week.
  • Baan of the Netherlands reported heavy third-quarter losses.
  • Sun, the computer and software group, reported a 25% jump in sales for its first fiscal quarter, ended in September.
  • Oracle, the leader in database software, may see some slowing in its traditional markets due to Y2K uncertainties.
  • Hewlett-Packard is expected to have a mixed picture due to the millennium bug.

Statistics:

  • IBM's mainframe sales were off by about 40% in the third quarter.
  • The company's market value was reduced by $37 billion.
  • Shares dropped by $22 1/4 to $90 1/2.
  • Other US technology stocks were also affected.
  • SAP reported disappointing results on Wednesday.
  • PeopleSoft reported a sharp drop in sales earlier in the week.
  • Baan reported heavy third-quarter losses.
  • Sun reported a 25% jump in sales for its first fiscal quarter, ended in September.
  • Oracle may see some slowing in its traditional markets.

Sources:

  • "Financial Times Limited 1999" by [No author mentioned]