IT Firms See Lull In Y2K Expenditures

Industry analysts are seeing IT consulting firms such as Keane Inc. as having continued depressed revenues through mid-2000, practically all of it attributable to the rapid scale-down of the Y2K compliance market. "Keane will have negative comparisons [year-over-year] in their numbers until about mid-2000," Prudential Securities analyst Thomas Browne says. Agrees Legg Mason Wood Walker Inc. analyst William Loomis: "The second half of this year will be tough for them." Keane, one of the nation's largest and most profitable IT firms, had been riding high financially on the powerful wave of Y2K crisis consulting for major corporations. Last week, however, the company announced that its second quarter revenues would be significantly off from earlier estimates, with the company stating it expected to report a quarterly profit of about 37 cents a share and year-end earnings of between $1.40 and $1.50 a share. Analysts had predicted 1999 annual earnings per share would range between $1.56 and $1.65 a share. Keane will report its second quarter revenues on July 15, before the market opens. Loomis notes that Keane was not alone in its dilemma; most of its competitors also are expected to begin issuing earnings warnings. "We're going to continue seeing a talking down by companies of the second quarter." Most companies will become increasingly conservative with the remainder of their IT budgets in anticipation of some expensive, unforeseen Y2K-borne crisis in early 2000. After that period, however, IT firms can expect business to resume, Loomis says.