As much as I like Amazon (AMZN) - Get Amazon.com, Inc. Report, and as big a threat to Amazon's future in the bookselling business as was Barnes & Noble's (BKS) - Get Barnes & Noble, Inc. Report proposed acquisition of book-distribution giant Ingram Book Group, I was sad to see this morning that government antitrust objections have led Barnes & Noble to scuttle the deal.
This was, approximately speaking, the deal of the century for Barnes & Noble. Not only did it fire a warning shot across the bow of its emerging competitor in the online universe -- a trigger that would never have actually been pulled, of course, for fear of certain and devastating government intervention -- but it also made a strong player a lot stronger. This was smart dealmaking at its best, and even if you're an Amazon fan (or, bizarrely, a Barnes & Noble-hater), you've gotta admire what Barnes & Noble was trying to do.
Certainly the Amazon people out in Seattle and Amazon holders alike must be breathing easier today. Forcing Amazon into acquiring more warehousing space, inventorying far more titles and building relationships with second-tier distributors was a tough, tough move by Barnes & Noble. Now that's over; Amazon can add warehouses and inventory only where they really matter, not as defensive moves.
Since the Street didn't much like Amazon's straying from its limited-inventory model, I expected to see a little bump in Amazon's battered stock price over this week. (Not visible yet, though; at noon, Amazon was down another 6 points. No mercy in this market, which seems determined to surrender day after day to the bears' love of gloom. The
Effect continues, as well, of course, as the steady, broad erosion in dot-com land. Serious buying opportunities lie ahead, friends, especially if you don't think you have to buy at the absolute bottom, which you'll miss, anyway.)
The effect of
Banc of America Securities
analyst Kurt King's Tuesday
on the broader personal-computer and server market continues. Worried about purchasing cutbacks in the last half of this year based on corporate redirection of funds into "hot fixes" for last-minute Y2K problems, King pulled both down to holds from buys.
After big hits yesterday, both stocks were down more at midday, along with PC makers
I bring this up not only to say that I agree with King's thoughts, but also because I keep running into confusion in investors' and PC buyers' minds on just what's going to happen. And as one of the first people to write about this slowdown -- I was forecasting down quarters for the major boxmakers in the second half of 1999 more than a year ago -- I feel some responsibility here.
I keep hearing from people that this slowdown is likely, maybe inevitable, because these manufacturers still haven't wrung all the Y2K bugs out of their machines.
I don't know of a single current model from any of those five major hardware makers that still has Y2K date-reading problems in its BIOS. The problem is not, repeat NOT, in the boxes; that isn't what corporate buyers are worried about.
The problem is that six months to a year ago, these buyers began diverting 1999 capital-acquisition funds into slush funds to deal, on a short-term basis, with Y2K problems in their software and hardware infrastructure. To a certain extent, that included replacing older PCs and servers with current machines -- which is one reason this slowdown has been so late and, so far, so mild -- but that's pretty much complete.
But much bigger issues lurk in companies' older code, running on mainframes and minicomputers. And while many companies have done a good job of cleaning up those problems, almost none are willing to declare themselves "safe" for Jan. 1 because of the interconnectedness of systems today.
That is, even if SeymourCo has done everything imaginable to assure that its computer systems are fully ready, Y2K-bug-free, the data-exchange connections between SeymourCo and its suppliers, distributors, outsourcers and customers are so complex that it cannot be sure it's safe unless it's prepared to vouch for the accuracy and sufficiency of the Y2K fixes those companies have in place.
Which no one is willing to do.
So yes, sure, the Y2K hardware-purchasing slowdown has begun, and it will get a good deal worse later this year, as I've said often here. But that slowdown, per Kurt King, isn't based on buyers' worries about major vendors' hardware, but about the need to spend a finite supply of IT-related dollars on software fixes over the next nine months or so.
Nice call, Kurt.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, Seymour was not long any of the securities discussed in this column, although positions can change at any time. Seymour does not write about companies that are consulting clients of Seymour Group, or have been in recent years. While Seymour cannot provide investment advice or recommendations, he invites your feedback at