Millennium bug 'could end bull run'

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The Independent Online
THE MILLENNIUM bug could prove to be the shock that ends Wall Street's 12-year bull market, a senior US economist warned yesterday.

Edward Yardeni, chief economist of Deutsche Bank Securities in the US, told participants at the World Economic Forum in Davos, Switzerland, that a build-up of negative news on the year 2000 problem might cause stock markets to dive.

Separately, Scott McNealy, chief executive of Sun Microsystems, said that Asian companies making PCs and computer components lagged the US and Europe by several years in dealing with the bug.

Advising consumers to "buy lots of computers in the second half of this year," he warned of severe supply problems after the turn of the century.

"We believe Asia is way, way behind," Mr McNealy said at the WEF annual meeting. "Intel, Sun and Hewlett Packard have done quite similar surveys of their supply base in Asia and they confirm the region is significantly behind in dealing with the problem."

However, the effects of the bug were played down by Bill Gates, head of Microsoft, who said he thought the problem had been much exaggerated by the press. There were bound to be some problems, he conceded, but he did not foresee a general systemic breakdown.

Mr Yardeni predicted a build-up of bad news on the bug from June onwards as companies began to make their SEC filings on whether they were millennium bug compliant.

"There are already 34 millennium bug lawsuits outstanding in the US and we'll see a lot more of that," he said.

Mr Yardeni said he thought the present euphoria in Internet stocks was symptomatic of "one of the greatest speculative bubbles on Wall Street of all time".

"If the stock market dives, which I think it will do in the second half of this year, then it will take the US consumer and economy with it," he warned.

"I don't know when exactly it will top, but I have no problem at all with lightening up and taking profits right now," he added.

A number of executives from the computer and Internet industries said that they thought the frenzy in Internet stocks was casting a cloud over legitimate high-growth companies that were transforming the way business was conducted across big tracts of the economy.

"The stock prices are unbelievable," said one industry leader, "but so are the growth rates in electronic commerce."

Mr McNealy used a press conference at the WEF to launch a new attack on Microsoft's near monopoly of personal computer operating systems.

He claimed that Microsoft was using the monopoly to "leverage" itself into all kinds of other businesses in a way that was stifling innovation and development in the industry.

He was sceptical that the various break up remedies proposed - splitting Microsoft into three competing companies or separating its operating system and applications arms - would correct the problem.