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   Technology StocksMicroStrategy Inc. (MSTR)


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To: Carl R. who wrote (654)3/31/2001 2:17:36 PM
From: Carl R.
   of 712
 
As we watch this company's stock price crumble, it provides an interesting learning opportunity. In order to show fast growth, they used some liberal accounting methods which later came back to haunt them as they were forced to restate earnings. But the problems ran deeper than that. It seems that they internally believed that they were really growing that fast and making money because their spending grew apace with the reported sales. R&D spending grew from $6 million in the 6-99 quarter to $16 million 3 quarters later. When revenues were restated that $16 million number turned out to be a whopping 32% of sales, almost 3 times higher than normal for a software company. Similarly sales and marketing expenses grew from $21 million in the 6/99 quarter to nearly double that 3 quarters later, which turned out to be 82% of sales, twice the industry average.

One interesting observation is that we tend to assume that when you invest in R&D and Sales expenses, those investments will produce growing revenues. MSTR thought they were growing much faster than they really were, and as a result they invested at a level way beyond the industry norm. Those expenditures apparently did not produce any excessive future growth. In March 2000, MSTR was out-spending BOBJ 2-1 on R&D, and out-spending them on sales expense as well, yet BOBJ at the time was 50% larger than MSTR and is now twice as big.

I expect MSTR will be an interesting case-study in business schools in the coming years. There is a lot that can be learned here, and my observations are no doubt merely the tip of the iceberg.

Carl

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To: Carl R. who wrote (655)4/2/2001 10:09:07 AM
From: Howard C.
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Excellent analysis. But let's not forget greed and the criminal (in my opinion) mindset of the CEO and his lackeys. Don't tell me that they didn't understand clear as day that you don't declare all the revenues garnered from a multi-year maintenance contract in the First year. The CFO surely knew that, and he is the Chief Compliance Officer too. Why isn't he behind bars? Besides the ones he drinks at.

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To: Howard C. who wrote (656)4/3/2001 10:03:54 PM
From: Carl R.
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I see that they refinanced the preferred stock, but I have no time to figure out if it is an improvement. At first glance it seems like a great deal for MSTR, but I'm sure that they preferred holders wouldn't have accepted it unless there is some hook for them.

Carl

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To: Carl R. who wrote (657)4/4/2001 9:06:25 AM
From: JMD
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Carl, when you do have the time, I'd appreciate hearing your thoughts on the MSTR refinancing of the preferred. thanks,

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To: Carl R. who wrote (655)4/5/2001 5:51:28 PM
From: Ilaine
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I agree that MSTR is one of the more interesting ones. The CEO's promise to fund a free university on the Internet available to everyone probably marked the peak of the bull market.

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To: Ilaine who wrote (659)4/6/2001 11:39:55 AM
From: Howard C.
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bull, indeed

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To: Ilaine who wrote (659)4/19/2001 10:59:31 AM
From: The Street
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biz.yahoo.com

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To: The Street who wrote (661)4/19/2001 11:28:18 AM
From: Kid Rock
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That is hillarious.

Should be posted on the joke thread!

Who is buying this POS @ 5?

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To: Kid Rock who wrote (662)4/19/2001 12:22:07 PM
From: Brasco One
   of 712
 
the letter to the shareholders was even funnier. LOL!

short this pos,,

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To: Kid Rock who wrote (662)4/19/2001 4:24:04 PM
From: Brasco One
   of 712
 
FWIW, MSTR is a POS! LOL!!!

Message 13313344

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