Bank technology vendors are feeling the effects of the new millennium a little early.

Some are suffering, as banks prioritize year-2000 fixes over less critical technology projects. Others are benefiting, as banks choose to install new core software, rather than remediate the old. Other results: sales in unexpected areas and less-than-anticipated sales increases.

Automated teller machine maker Diebold Inc. blamed lower second-quarter earnings in part on customers' year-2000 distractions. After the June earnings announcement, company spokesman John Kristoff said that making year-2000 adjustments "is a top priority for banks. Buying ATMs is not a priority."

Information Technology Inc., a subsidiary of Fiserv Inc. that sells core bank processing systems, said the year-2000 focus is a positive. Sales to new clients increased 30% this year, said Rod Poskochil, president and chief executive officer, and at least half of the new business was related to year-2000 issues.

"We anticipated an increase," he said. "We assumed it would be easier for banks to switch than to remediate."

Another provider of core banking software, M&I Data Services, said new sales are remaining steady, with companies becoming hesitant to install software so close to 2000, said Martin Langer, vice president and year-2000 director.

However, the Milwaukee-based computer services subsidiary of Marshall & Ilsley Corp. has seen an increase in its outsourcing business.

"Banks have looked to outsource because of what the high cost of year- 2000 conversion would be internally to them," said Mr. Langer.

Peerless Group, another provider of core processing software, expects to see a rise in sales of year-2000-compliant systems in the second half or in 1999, said Steven W. Tomson, president.

"The fear factor has delayed some decisions until people get more confident of where they are in testing," he said.

At Computer Sciences Corp., the year-2000 problem has led to an increase in consulting, though not for year-2000 issues, said G. Edwin McComas, vice president in the El Segundo, Calif., company's banking and consumer finance division.

Preferring to have in-house employees work on millennium projects, banks are turning to CSC to handle day-to-day technology programs, Mr. McComas said.

Meanwhile, companies that specialize in solving the year-2000 problem are not racking up the business they thought they would. In a survey by the Information Technology Association of America, 79% of these vendors said they could handle more work, and 37% were meeting their annual year-2000 sales projections.

Andrew Pegalis, president of Next Millennium Consulting Inc., a year- old risk management firm in Bethesda, Md., that caters to financial institutions, said its year-2000 work is running at 50% of projections. But he hopes business will pick up in the second half.

Officials at Millennia III Inc., a Westport, Conn., consulting firm, also anticipated having more customers, said Craig Mengel, marketing vice president. The firm is meeting its revenue forecasts, however, because its projects are more lucrative than expected.

"After Labor Day, when people regroup and are faced with making more- detailed disclosures, they will have to fill in the gaps with companies like ours," Mr. Mengel said.

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