Big Plans Fizzle as Vision Blurs
It didn't escape Michael Saylor's notice back in June of 1998 that "MSTR," the stock ticker symbol for his newly public firm, MicroStrategy Inc., could just as easily be shorthand for something else: "Master."
"As in 'master of the universe,'" he told the aides and investment bankers with him on that day when the software company's stock first began trading. This was a consummate Saylor line, a snapshot of the ambition that made him the most celebrated technology entrepreneur in Washington. He vowed that his software would one day "purge ignorance from the planet," that it would render information as ubiquitous as water. He joked about running for president, compared himself to Mother Teresa, claimed to be doing God's work.
Last spring, when grandiosity - rational or not - had become a Wall Street gold standard, shares of MicroStrategy catapulted to $333. Saylor's net worth, on paper, reached $14.5 billion.
Now, with MicroStrategy's shares trading below the price of a Starbucks latte, Saylor's MicroStrategy holdings have "sunk" to $129.2 million. But the level of Saylor's fall far transcends the lost wealth, Securities and Exchange Commission investigation and shareholder lawsuits of the past year.
Tuesday, MicroStrategy held a symbolic funeral for Saylor's most grandiose dreams: The company sharply reduced its commitment to a subsidiary, Strategy.com, that was once considered the cornerstone of its effort to be a pervasive delivery service for information and commerce. And it said it wanted to sell its wireless communications service, Angel.com.
The company will retreat to making its "data-mining" software, tools that cull information from databases so businesses can analyze customers and trends. MicroStrategy also said it would lay off a third of its workforce, about 600 employees.
Certainly, there's plenty of pain to go around in high-tech these days. Another fallen local tech star, PSINet, announced today that it may file for bankruptcy. Last week, the Reston Web services firm Proxicom laid off nearly 20 percent of its workforce. Examples abound, and the new batch of laid-off MicroStrategy employees won't lack for company.
But MicroStrategy's miseries are more pronounced and dramatic than most, given the volume and scale of Saylor's pronouncements.
"Like Bill Clinton, MicroStrategy was brilliant, but there's a sad feeling that it has not lived up to its promise," said Mark Bisnow, Saylor's former chief of staff, who left the company earlier this year. Others who have watched Saylor are more blunt.
"Michael was able to live in a dream world for a long time," said Nigel Pendse, a software analyst for the England-based OLAP Report, who has followed MicroStrategy for the past five years. "Anything was possible, and people believed it. Now, it's obvious that it was all Michael's mad dream."
It was, for so many people, such a compelling dream. And no one sold it harder than Saylor. He proclaimed that he was out to build an electronic network that would capture a trillion dollars worth of transactions in areas as diverse as ticket bookings, stock purchases, and credit card refinancings.
Saylor, through a spokeswoman, declined to comment for this story.
Saylor saw the Internet and new wireless technologies putting much of America's commerce in play. By convincing consumers to trust MicroStrategy and its affiliated businesses with personal information, he aimed to bombard them with individually tailored sales pitches delivered to their cell phones, pagers, computers, telephones, and other communications devices.
Then he hoped to earn fees by allowing consumers to complete a transaction at the push of a button.
"I don't think about building a business that will last until I'm dead. I think about building a business that will last until people don't need a television anymore," Saylor said.
"A thousand years from now, if we're all floating upside down in a saline solution with IVs in our arms, and all we do is watch 3-D holographic videos while robots do all the work, then as long as we get to pick the video, there's going to be a need for" MicroStrategy's services, Saylor said.
Strategy.com, which distributes personalized weather, news, sports and traffic reports, figured prominently in his plan. But Strategy.com, conceived at a time when any business with a ".com" in its name seemed to have instant cachet, now faces the dot-com downdraft.
The first turning point for Saylor and MicroStrategy came a year ago, when the company stunned Wall Street by announcing that it had overstated revenue and earnings for two years, and that what investors trusted was a profitable company was actually losing money. Weeks later, MicroStrategy disclosed that it had overstated its results for three years and was losing money when it first sold stock to the public.
After the initial March 20 disclosure, the stock plunged, spiraling through the year along with Saylor's fortunes. In December, the SEC accused Saylor and two other executives of fraud. In a civil complaint, the SEC painted a picture of Saylor and others discussing "the financial results they would like to report" at the close of a fiscal quarter and timing the booking of recent deals accordingly. The SEC also alleged that MicroStrategy booked revenue before transactions were completed.
Without admitting or denying wrongdoing, Saylor settled by agreeing to pay a $350,000 fine and give up $8.3 million of alleged ill-gotten gains from selling MicroStrategy stock when the numbers were inflated.
Tuesday came the second turning point. The company announced that Strategy.com's budget and workforce were being trimmed and it was seeking strategic partners. The move was not surprising, given its recent struggles. But in light of Saylor's heady vows of yore, and his recent success at attracting big-name Washington technology executives to Strategy.com's board, it was striking.
A year ago, Saylor pledged that he would "never hedge the company." The latest annual report says "substantially all of our assets" are pledged as collateral for a $10 million loan and a credit line, not yet finalized, that would allow MicroStrategy to borrow up to $20 million.
He also vowed his unflagging loyalty to his workers. "This I assure you," he said at the company recruitment fair last year. "If you join our firm, there is no way - no way - you're going to see us ever back down, give up, slow down or sell you out...We would never abandon our mission," Saylor said.
"What you need is you need someone...that won't give up, won't pull the rug out from under you. We are that someone," he said.