|To: zax who wrote (675)||4/24/2001 1:49:38 AM|
|From: Jay Fisk|
|Lets look at the timing - On Tues 4-17-01 at 3:15 MSTR scheds a Conf Call for 4-30-01. They've already pre-announced larger-than-expected losses earlier in the month. |
Wednesday is spin-control day. Earnings are far worse than anyone expected earlier. Only seven days to unload shares before the 30th and the volume is anemic. What to do ???
Hence the infamous "Letter to Shareholders" was borne. Did anyone actually get one ? Or was it just a press release timed to hit 15 minutes before the market opened on Thursday 4-19-01 ????
What's really bizarre is that anyone believes that placing shares in a non-margin account (or placing a GTC sell order above the market) has any effect at all.
Any market maker that is deemed to "make a market" in MSTR, ie quote a bid and ask, is allowed to short naked, without shares in inventory. Its allowed by NASDAQ, totally legal, done everyday.
In fact any investor outside of the US can do the same thing as well as US citizens with offshore accounts. Nothing illegal as long as you declare your income at tax time.
As far as the hedge funds that provided the 125 mil to MSTR ???? They'll cover with company-provided shares, not a part of the float. (Read the 10Q)
Amazing that anyone still falls for the "call-in-your shares-protect-us-from-the-evil-shorts" scam.
The only twist that would have made it even more believable would have been a self-imposed freeze on new insider sales. (of course pre-existing orders would be OK - just not mentioned.
I'll bet MSTR is in the pinks within 60 days.
Just my 2 cents.
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|To: Anthony@Pacific who wrote (678)||5/2/2001 4:43:31 PM|
|From: Jay Fisk|
|Uhhh.... doesn't look good even with the nonsense proforma numbers reported....|
MicroStrategy's Losses Beat Dire Predictions
(05/01/01, 7:17 p.m. ET) By Rick Whiting, InformationWeek
Business intelligence software supplier MicroStrategy Inc. has reported sales and earnings for its first quarter that slightly exceeded the dire warnings it issued in early April.
The company reported a net loss of $20.6 million (28 cents a share) compared to a net loss of $32.9 million (42 cents) in the same period last year. Revenue increased less than 2 percent to $51.4 million from $50.6 million one year ago.
In April, MicroStrategy (stock: MSTR) said revenue for the first quarter would be $47 million to $51 million and its loss in the range of 31 to 37 cents per share.
The vendor has been struggling for more than a year and has been hit hard by the economic slowdown.
The company, which is in the process of cutting 600 jobs, or one-third of its workforce by the end of the current quarter, reduced its operating expenses by about $5 million and improved its pro-forma operating results by 33 percent year-over-year.
There were warning signs about the future, however. Particularly worrisome was a 25 percent plunge in the vendor's license revenue to $19.6 million from $26 million in the same period last year.
License revenue is a key indicator of future growth.
>> More from InformationWeek >>
Unbelievable anyone would risk one cent on this one !
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|To: Jay Fisk who wrote (680)||5/9/2001 3:18:23 PM|
|From: Carl R.|
|This was on the wire today:|
By Michael Rapoport A Dow Jones Newswires Column
NEW YORK (Dow Jones)When you refinance, you typically do it because you think you'll be better off whether you're a homeowner refinancing a mortgage to take advantage of lower interest rates or a company refinancing its debt to make it easier to pay back.
But, the company's assertions notwithstanding, it's hard to see how beleaguered MicroStrategy Inc. (MSTR) is much better off from its recent refinancing of $125 million in convertible preferred stock.
The company, still trying to recover from its accounting disaster of last year, has touted the refinancing as removing a lot of uncertainty from its future by turning away from a path that could have resulted in virtually unlimited dilution to the value of its existing shares. But while refinancing buys some time for MicroStrategy, it carries its own problems, including a big cash outlay that depletes the company's coffers and significant dilution a few years down the road regardless.
And after all that maneuvering, the refinancing doesn't even remove the danger of UNLIMITED dilution it was ostensibly meant to address. If MicroStrategy can't get its stock price back up from its current singledigit level over the next few years, current shareholders could face major dilution to the value of their holdings.
Before getting into the refinancing, here's how the original financing would have played out.
MicroStrategy originally issued the $125 million in convertible preferred stock last June. At that point, it was convertible into MicroStrategy common shares at a price of $33.39 a share, based on MicroStrategy's share price at the time. But there was a time bomb in the terms: The conversion price could be reset once a year, to wherever MicroStrategy's price was around the anniversary of the financing.
That meant that if MicroStrategy's stock price plunged, preferredstock holders would get more common shares when they converted their $125 million into a commonstock stake. The lower the price went, the more shares they'd get, creating greater and greater dilution. That's why these types of convertibles are known as "deathspiral" securities.
MicroStrategy stock is currently trading at just over $5 a share, and the anniversary date of the financing is approaching. So unless the stock price were to suddenly shoot upward, the conversion price would have gotten revised sharply downward soon and it was possible some of those preferred holders would start converting.
Ultimately, if the stock stayed at its current price, MicroStrategy might have had to issue 24 million shares to convert the stock, plus up to another 6 millionplus shares over a maximum term of four years for dividends on the preferred stock. That's total dilution of about 37%. And if the stock's price had continued to fall, the price could have been reset again, and dilution could have gotten even worse.
Enter the refinancing, in early April. The new terms call for the company to buy back some of the preferred shares for $25 million in cash, and to exchange most of the rest for three new series of preferred shares maturing in 2004, all with much lower conversion prices from $5 to $17.50 a share.
Problem solved, right? At those conversion prices, MicroStrategy would still suffer some dilution about 11 million common shares would be issued to convert the preferred stock, causing dilution of about 13.5% over the next few years but at least it removes the flexible conversion prices that raised the risk of unlimited dilution.
"Given recent market developments, our capital structure was creating too much uncertainty for investors," said Michael Saylor, MicroStrategy's chief executive, in a statement at the time the refinancing was announced. (A MicroStrategy spokesman declined further comment.)
But read the fine print. The $5 conversion price on one of the new series of preferred stock is fixed, but there's still some worrisome flexibility on the other two series.
When the preferred shares mature in 2004, MicroStrategy has a choice: It can either pay about $61 million in cash to redeem the preferred shares, or it can convert them to common stock. The cash option is probably what MicroStrategy would prefer, but it may not have a choice the company is currently a little hardpressed for cash, although it's impossible to say what things will look like in three years.
So, if the cash isn't available, MicroStrategy may have to convert the preferred stock. But here's the rub: If MicroStrategy's stock price is lower at the time of maturity than the two preferred series' conversion prices $12.50 and $17.50 a share then the conversion price gets revised downward to the market price, wherever it is.
And that would mean greater dilution. If the stock's price stays where it is today, in fact, MicroStrategy would have to issue about 7.4 million shares more than it would have to under the current conversion prices.
And that's not all. Those two series of preferred stock carry huge dividend rates of 12.5% a year, payable in cash or common stock. Again, it's possible MicroStrategy might have to use stock instead of cash to pay those dividends. That would mean an extra $23 million worth of stock issued by 2004 4.4 million more shares if the price stays where it is now.
Finally, there's another $5.3 million worth of the original preferred stock that isn't being converted to new stock. Either MicroStrategy will pay cash to redeem it, or it'll have ITS conversion price lowered to the market price in July. At current prices, that's another 1 million shares.
Add it up: 11 million common shares to be issued in 2004 under the best circumstances, plus another 7.4 million if the stock's price stays where it is now, plus another 4.4 million for dividends over the next three years, plus another 1 million for the remnants of the old stock. In all, MicroStrategy may have to issue up to 23.8 million shares, which would be dilution of about 29%.
When you put that together with the $25 million in cash the company is paying, the refinancing doesn't seem like a great bargain. And remember, this is assuming the stock stays where it is now. If it's lower in 2004, dilution is even more severe; if it's higher in 2004, dilution is less severe.
Or look at it another way. Forget about dilution. Forget about what MicroStrategy's stock will do. Under the original terms, MicroStrategy would have had to pay out about $163 million in cash and/or stock to preferredstock holders, counting all dividends and assuming MicroStrategy extended the maturity date to 2004, the maximum it was allowed to under the agreement. Under the restructuring, MicroStrategy will have to pay out about $148 million by that time. A savings of only $15 million over three years? Doesn't seem like a lot for all the effort.
Of course, by 2004 this matter may be moot, one way or the other. MicroStrategy says it expects its core business to hit the breakeven point by the end of 2001, and maybe the company will generate enough cash by 2004 to redeem the preferred stock. But as of March 31, the company had a cash position of only $91.4 million and that may not last long for a company whose operations burned through $87.8 million in cash during 2000. Especially when the company has just committed to that $25 million cash payment for the preferred sock, and plans to spend more on restructuring.
Any significant dilutionrelated issues for MicroStrategy are well in the future, of course, and may never come to pass. But don't think the refinancing has magically solved all of MicroStrategy's potential problems with dilution. It hasn't.
By Michael Rapoport, Dow Jones Newswires; 2019385976; email@example.com
(END) DOW JONES NEWS 050901
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|To: Jay Fisk who wrote (680)||5/12/2001 6:51:13 PM|
|From: Glenn Petersen|
|From this week's Barron's:|
On March 5 of last year, Michael Saylor, a 35-year-old multi-billionaire, disclosed his plan to spend $100 million for an online university that would offer "free education for everyone on earth, forever."
Saylor, the chief executive of a highflying software firm called MicroStrategy, was then worth (on paper, anyway) about $12 billion. His "data-mining" firm had been extolled in the press for doing everything from allowing GE Capital to better manage its fleet of leased cars to helping Victoria Secret discover the alluring fact that New York City stores sell the largest number of black bras.
From a 1998 offering price of $6, the stock had soared as high as $333 just days before Saylor's announcement, giving the company a market cap of a whopping $27 billion.
But then, on March 20 the company disclosed that reported earnings had been an accounting fiction. Boom! The stock plunged $140 in a day.
When the financials were subsequently restated-for '97, '98 and '99-profits turned to losses.
But that wasn't the end of it. The SEC charged that MicroStrategy's accounting fiction was outright accounting fraud. In December, Saylor and two other execs, without admitting or denying the charges, agreed to pay over $1 million in fines.
Just last week, MicroStrategy's accountants, PricewaterhouseCoppers, agreed to pay $51 million to settle a shareholder suit stemming from the collapse.
Even though early last month MicroStrategy' stock traded as low as $1.75 a share, Michael Saylor insists that by focusing on its core business and dramatically slashing costs, the company will break into the black this year. On April 19, in a stirring letter to stockholders, he urged them to "combat short selling" by immediately transferring their stock out of street name to stop brokers from "loaning" the shares to short sellers.
That day the stock shot up 76% to $5.23. It closed Friday at $4.76.
So what are the odds of a turnaround.
Here's the dope from the guy at Merrill Lynch, MicroStrategy's lead underwriter: "We believe the deterioration of MSTR's business is accelerating. Employee attrition, cash constraints, internal restructing and a macroeconomic slowdown augur poorly for the company's prospects." In May, the analyst noted, "risks are increasing."
In early February, Saylor announced that he would sell 15,000 shares a day for the next two years, no matter what the price of the stock. The proceeds on the first day, February 12, were $156,000; on the second, $166,650; on the third, $158,400-well you get the idea.
It got us thinking that Saylor's advice to shareholders is absolutely right. Under no circumstances should they be "loaning" out their shares. Instead, like Saylor, they should be selling them.
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|To: Glenn Petersen who wrote (682)||8/2/2001 12:07:54 AM|
|From: Jay Fisk|
|A couple odd items that need explanation:|
1. How did the $25 million in restricted cash get tapped? Wasn't that supposed to stay with Strategy.com?
2. They claimed a $25 million gain in litigation settlement. In the past, litigation stuff was not part of the pro forma, but I guess since it's positive, they'll throw it in.
3. They claimed an additional $11 million for refinancing the Series A preferred and $18 million for conversion, resulting in a net loss of $5 million.
Now if we really took out the one-time items:
That's a total of $54M in earnings adjustments that only occur once. Adjust accordingly, and the quarterly loss is around $60M.
Considering revenues were $49M, they've got a long way to go to making money.
Burned another $30M this quarter. It's not looking pretty.
For all the longs: I can't see how you consider this an improvement. These guys are doomed. Do you really think the current valuation of $300M is justified? I don't think MSTR is even worth the amount of debt they currently have.
Courtesty of an opinion found on Yahoo
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|To: long-gone who wrote (684)||1/8/2002 8:40:34 PM|
|From: Glenn Petersen|
|A devastating series of articles from the Washington Post:|
DOT-COM HALO : The Rise and Fall of Michael Saylor
MicroStrategy's CEO Sped to the Brink
About this series
This series of articles is based on interviews with Michael Saylor and more than 100 people who have known, watched or worked with him. It is also based on court documents, MicroStrategy memos and internal e-mails.
By Mark Leibovich
Washington Post Staff Writer
Sunday, January 6, 2002; Page A01
First of four articles
There were times, when it was all going right, when Michael Saylor would stare out the huge oval windows of his leased Gulfstream jet and fixate on the Rocky Mountains passing below him. He would marvel at how he was covering more territory in five minutes than the western settlers covered by wagon over several months.
This was back in 2000, at the height of the Internet age. In a few Nasdaq months, Saylor's newly public firm, MicroStrategy Inc., had gained a stock value that exceeded the total worth of his former employer, the venerable DuPont Co.,198 years old. In a few Nasdaq seconds, Saylor could amass more wealth than his father had in his 30-year Air Force career.
It didn't matter that MicroStrategy was just a software maker that helped companies manage their inventory and customer information. Saylor had what he called "the dot-com halo," the aura that came with being not just a business, but a revolutionary one. He become an icon to his "constituencies," as he called them -- the media, Wall Street, his employees. He wasn't building a firm as much as a belief system.
"We're purging ignorance from the planet," Saylor often declared in his high, throaty voice. He was on a "crusade for intelligence," one that sounded just grandiose enough to be plausible at a time when technology chief executives stirred such exuberance, rational or otherwise.
On Feb. 4, 2000, with MicroStrategy's shares at $142 and his paper wealth shooting into the billions, Saylor hosted a 35th birthday party for himself at Cities, the fashionable Adams Morgan restaurant. "Guess who's old enough to run for president?" the invitation said, and Saylor duly announced his candidacy that night, a would-be standard bearer for "The Technology Party." He was kidding. Or seemed to be. But at the time it seemed weirdly possible.
Then, just a few weeks later, it all crashed -- a flip of fortunes that was sudden even by the exaggerated norms of the late 1990s and the early part of 2000. Saylor's life and companybecame object lessons in how ephemeral success could be in the new economy, how perspective could be so easily lost, and how myths -- and stock fortunes -- could so easily vanish. When MicroStrategy's story began to unravel, at least some industry and Wall Street watchers believe, it signaled the end of that era. "This one popped the bubble," wrote James Cramer, columnist for TheStreet.com. "MicroStrategy forever changed the Internet mania."
In a starkly compressed time frame, Saylor was transformed from a new world titan to an age-old parable: "It's the same story in a way of a classic Greek tragedy," said Don Griffith, a former Securities and Exchange Commission lawyer who grew up with Saylor in the Dayton suburb of Fairborn, Ohio. "It's the story of Icarus and Daedalus. Mike was the guy who flew too close to the sun."
Saylor grew up wanting to be an Air Force fighter pilot, attended MIT on an ROTC scholarship and entered business after a heart murmur grounded him. He often applied flying metaphors to his corporate rise. He spoke of how the "juice" of high-speed business can either "skyrocket" an entrepreneur or "blow him up." He also did some of his best thinking in the back of the Gulfstream, the night sky heightening his solitude. These were mostly peaceful meditations. But not the one on the flight that Saylor remembers best.
Late on Friday night, March 17, 2000, Saylor was flying to Washington from San Francisco. It was a few days before MicroStrategy was scheduled to sell newly issued stock to the public, which would help the company pay for its CEO's manic expansion plans. The sale was expected to raise $2 billion -- the largest public offering in software industry history.
Saylor was returning from a "roadshow," the ritual that comes before a stock issue in which executives promote their companies to big investors and fund managers around the country. By every appearance, Saylor's meetings were going well, and shares of MicroStrategy finished the week at $226.75. "I'm at the top of the world, everybody loves me," recalled Saylor, who was then the wealthiest person in the Washington area, at least on paper. "Everybody loves the company, we're hitting the cover of every magazine. . . . I was household."
But Saylor knew that he had a secret. A week earlier, MicroStrategy's financial auditor, PricewaterhouseCoopers, had called into question some of the company's accounting records. The accountants wanted MicroStrategy to restate some of its financial reports, a potentially devastating step that could send Wall Street into a selling panic. Negotiations had raged all week between officials of MicroStrategy and PricewaterhouseCoopers to determine the need for, or magnitude of, a restatement. Meanwhile, Saylor continued to pitch his company to eager investors in Chicago, Kansas City, Los Angeles and San Francisco.
When the roadshow ended, Saylor flew home, sullen and alone on a beige leather sofa in the back of the $40 million jet. "I know the gods have this wicked sense of humor because of what they did to me," Saylor said later. "They put me in a position where I was simultaneously the most successful person of my generation and in hell. All at the same time."
Like the company he still leads, Saylor seems diminished and weary by what he calls "my ordeal." In the same way that presidents, in their photographs, look as though they've aged eight years for every four they've been in the White House, Saylor, now 36, seems to have aged about six since his 35th birthday. His boyish flop of brown hair has gone half gray. His fresh round face has become jowly and bearded. His chest-out walk, once the stomping gait of a man who knew exactly where he wanted to go, has acquired an uncertain slump.
In a series of interviews between May and January, Saylor seemed at once humbled by his experience and bitter. At times, he drew comparisons between himself and victims of diseases or violent crimes. "I don't think that the trauma or stress I felt is any worse than the stress that a father feels when his son has leukemia," Saylor said last summer, describing his feelings during his company's sudden fall. "Or whose wife is dying. I think it's the same . . . in my case, it was my company catching leukemia."
Saylor always fancied his mission to be a seminal one. His role models were Caesar, Churchill, Gandhi and Gates. He decorated his basement with framed press clippings about himself. He kept a sculpture of Rodin's "The Thinker" in his office and he had a searing need to believe that MicroStrategy was doing work for the ages. And, for a while, his constituencies needed to believe in him as well -- in all his possibility, in all the new economic rules that his success seemed to prove.
As it turned out, Saylor earned his place in history through the narrative of his rise and swoon. This series of articles reconstructs that story. It is based on interviews with Saylor and more than 100 people who have known, watched or worked with him. It is also based on court documents, company memos and internal e-mails that were provided to, or summarized for, The Washington Post by officials at MicroStrategy and sources involved in private lawsuits and an SEC investigation of the company.
What emerges is a vivid dispatch from one of the most perplexing and tumultuous periods in economic history. It also provides one of the great, and largely unseen, corporate dramas in the evolution of the Washington area as a major technology center.
At the story's hyperkinetic center is Michael Saylor, who became the exemplar of two eras, boom and bust, in their greatest extremes. And it all happened in a matter of days.
"I guess," Saylor said, smiling at the thought, "that I represent a strange piece of history."
'Hit the Floor Running'
The thinking went like this: If Thomas Edison were to write a book about his life and legacy, it would be called "Electricity." So Michael Saylor believed that he should write a treatise of his own, called "Intelligence."
His pursuit -- to make the species up-to-the-second smarter -- was so elemental to civilization that it needed to be distilled in a book, one of those really big books, maybe more than a thousand pages. Not for vanity's sake, but for history's.
On Jan. 31, 2000, before a meet-and-greet with former Treasury secretary Robert Rubin, Saylor met with the literary agent Amanda "Binky" Urban in Midtown Manhattan to discuss "Intelligence." She was intrigued by the idea, and they agreed to keep in touch.
People throughout Saylor's life describe him as the smartest person they have ever met. "Usually you find a guy with [Saylor's] intellect in the back of some lab, interacting with rats," said Joe Robert, a Washington area real estate maven who befriended Saylor during his rise. But Saylor was no outcast, Robert said. He could converse on diverse topics and with multiple audiences: He could quote from Augustus and "Caddyshack" alike, talk circuitry with engineers, numbers with financiers, Big Vision with investors and bachelorhood with the media.
He loved music, played the tenor sax and trombone as a teenager, and would later teach himself guitar and piano. He was valedictorian at Park Hill High School in Fairborn, where he lived from age 11 with his parents, brother and sister in a small aluminum-sided duplex on Wright-Patterson Air Force Base. He was raised in a taut, Southern Baptist household, steeped in chore regimens and vice-free conservatism -- no cussing, smoking, drinking. "Hit the floor running, son," Chief Master Sgt. Jerry Saylor would yell into his son's bedroom, after waking him at 6 a.m. with a loud clap. The $50,000 ROTC scholarship Saylor earned from MIT was worth five times the amount of his family's entire savings at that time.
John Sterman, a marketing professor at MIT, said Saylor was "always an unusual fellow, far more serious than most at MIT. . . . a student you wouldn't forget." For a class project, Saylor built a computer-simulation model that applied the ideas of Plato's "Republic" to an ideal civilization. To meet his undergraduate thesis requirement, Saylor, inspired by Machiavelli's "Discourses," wrote a computer program that simulated the reactions of varied government systems to calamities such as famines, plagues and war. He graduated with highest honors, earning a degree in aeronautics and astronautics, as well as one in science, technology and society.
Saylor started MicroStrategy in 1989 with Sanju Bansal, his MIT roommate and fraternity brother. Saylor had spent two years writing computer models for DuPont's titanium dioxide business, but wanted to start his own business. He persuaded his boss to give him a $250,000 consulting contract to continue building computer models. The deal came with office space near DuPont's headquarters in Wilmington, Del.
In 1992 MicroStrategy developed an early version of the product that would become its franchise: software that allowed companies to extract useful bits of information from their unwieldy corporate databases. By using the software, for instance, McDonald's could learn that a Chicago franchise was four times more likely to sell Big Macs on winter Friday nights than was a franchise in Miami (where customers disproportionately preferred filet-of-fish sandwiches). While seemingly trivial, such data would prove vital to the companies, and even as other software companies were developing similar "data-mining" products, as they were called, Saylor and Bansal were able to impress and attract an early array of Fortune 500 customers.
In 1994 Saylor and Bansal moved the company and its 50 employees from Wilmington to Tysons Corner, figuring it would be easier to lure elite workers to the Washington area, "a major center of civilization," Saylor said. MicroStrategy doubled its revenue every year between 1994 and 1997.
Part of Saylor's marketing savvy in the late 1990s sprang from his unwillingness to stay confined to the niche of back-office technology. No matter how solid MicroStrategy's business and product was, Saylor felt restless. What Saylor craved -- and ultimately sold -- was a higher corporate purpose for MicroStrategy: He wasn't so much making tools as much as he was "freeing information." He wasn't a seller of data-mining software but a purveyor of "intelligence," just as Bill Gates's mission at Microsoft wasn't simply to sell software for personal computers but to put "a computer on every desktop."
In computing history, which Saylor studied closely, the dominant companies have been the ones that could shroud the unsexy functionality of their products in the sleek possibility of What Could Come Next. As Internet, database and wireless technologies evolved, Saylor said, information would soon become an essential utility, "like water," and MicroStrategy would be the company that spread it everywhere. Enlightening McDonald's about its Big Mac sales was just a start of a grand technological crusade that would eventually "purge ignorance from the planet."
By the time MicroStrategy held its initial public offering of stock in 1998, Saylor was gaining little notice for his data-mining products and plenty for his vow to spread "information everywhere." He began to pitch his company's software products in mystical rhetoric. The back cover of MicroStrategy's prospectus -- published in conjunction with the IPO -- included a boldface quotation from science fiction author Arthur C. Clarke: "Any sufficiently advanced technology is indistinguishable from magic."
Shares were priced at $6 for the June 11 offering (adjusted for a Jan. 4, 2000, stock split), and they doubled by midday. On the Merrill Lynch trading floor that morning, Saylor grinned as he noted that "MSTR," MicroStrategy's ticker symbol, was listed on the Nasdaq ticker right after "MSFT" (Microsoft), a company that Saylor idolized.
"Warning," a message flashed over the trading floor. "Do not confuse MSTR with MSFT."
The Grand and the Grandiose
On the surface, MicroStrategy seemed the prototype of the democratic new-economy workplace: Employees could wear jeans to work and were always free to e-mail the CEO with ideas. But these egalitarian appearances belied the company's military ethos, with Saylor as a ubiquitous general in a theater of his own creation. To a degree that is unusual among even the most obsessive entrepreneurs, MicroStrategy has been Saylor's life. He worked late into most nights, often seven days a week.
Saylor fervidly protected his ownership stake in the firm, and this insistence almost led to the company's demise before it left Wilmington. In 1994, the firm's senior managers -- Sid Banerjee, Dave Sherwood, Steve Trundell, Eduardo Sanchez, Ed Jurcisin and Manish Acharya -- were working long hours and receiving relatively low salaries. When they asked for an equity stake, Saylor and Bansal resisted until the managers finally walked out en masse on a Friday. By Monday, the group had retained a lawyer. Negotiations ensued, and the dispute was settled when Saylor and Bansal agreed to grant the managers a collective 7 percent of the young firm.
Saylor was even more hesitant to give any ownership stake to outside investors, particularly venture capitalists, a species he publicly loathed and distrusted. He feared that venture capitalists -- or other big investors -- would "dilute the vision" of his company. At the time of the IPO, Saylor retained a remarkable 73.1 percent, or 22.5 million, of the company's shares (Bansal held another 12 percent). This effectively allowed Saylor to do as he pleased with his firm, unconcerned by any possibility of ever being overruled, taken over or forced out by other investors.
Saylor's childhood bred in him a strong sense of insularity and control. "I'm very at home in paternalistic environments," Saylor said. Each winter, he took his employees on a Caribbean cruise (no spouses allowed) to promote corporate solidarity. New workers underwent a rigorous "boot camp" where they were drilled on the arcana of MicroStrategy's business and required to complete an outdoor ropes course. Saylor's top lieutenants comprised a brainy fraternity of longtime male pals, several of whom had attended MIT together. Executives who came from other companies often had brief and unpleasant experiences at MicroStrategy.
Saylor was prone to volcanic impatience. "Are you trying to kill us?" Saylor would boom in meetings, or invoke a well-known Gatesism, "That's the stupidest [expletive] thing I've ever heard." If a person was talking too slowly, Saylor would often take out his Dell laptop and start doing other work. His longtime associates viewed him with a mix of awe and dread: They marveled at his zooming technology mind and also spent a lot of time anticipating what might preoccupy or set him off next. One executive compared the dynamic of MicroStrategy's executive team to "alcoholics around a dinner table."
When he was not speaking, Saylor's eyes would assume a sunken deadness. He spoke in a robotic cadence, as if delivering social graces -- "Nice to see you again" -- by dint of some how-to program embedded in his skull. He would sometimes talk with such energy that his face twitched. He habitually slammed doors, even when he was not upset. Even his closest friends say Saylor can often be long-winded, tiresome and just odd.
But Saylor could also be inspiring, generous and loyal. He rarely fired people. "You had to really underperform at MicroStrategy to get fired," said Manish Acharya, who left the firm in early 1999. He recalls firing someone with Saylor -- and how Saylor spoke of being "traumatized" for days afterward.
Saylor's loyalty was returned: MicroStrategy's turnover rate -- about 7 percent in 1997 and 1998 -- was low among software companies. With only moderate irony, employees would dub themselves members of the "cult of MicroStrategy," and Saylor was their charismatic leader. A television monitor in the lobby played a constant loop of Saylor's speeches.
If they bought into his mission, Saylor told prospective employees at the end of their boot camp sessions, they could help him "bend reality through sheer force of will." Saylor's boot-camp sermons lasted hours, sometimes up to nine. "Heaven for me is a microphone and a captive audience," Saylor said, and he relished the gamesmanship of sales and motivational talks, "that deer-in-the-headlights moment when you know you've flipped someone," he said in 1998.
"I've never seen someone who could transfix a room like Mike Saylor," said Mark Bisnow, who was an aide to Rep. John Anderson and Sen. Robert J. Dole, and whom Saylor hired in April 1998 to be his personal publicist, or, officially, his chief of staff. Bisnow's mission was, in Saylor's words, to "put me in front of the right people" -- Binky Urban and Robert Rubin, among them. Bisnow ran Saylor's public life as a permanent branding campaign, which seemed about perfect to Saylor.
"I'm a political leader," Saylor declared to Washingtonian's Harry Jaffe in early 2000. "I have a nation. I have constituents. I have investors." Bisnow worked tirelessly on his behalf, calling anyone, anywhere, who might be worth Saylor's seduction. Saylor eventually started calling Bisnow his "secretary of state."
Others called him worse. Several MicroStrategy executives and board members complained -- usually privately -- that Bisnow had become an unchecked agent of Saylor's ego. One Washington technology chief called Bisnow "Michael's crack dealer," feeding Saylor's addiction to attention.
"If he ever had any impulse of restraint, Bisnow would push him back in the other direction," said a longtime MicroStrategy executive who left the company in 2000. Profiles of Saylor included his soliloquies on his ideal wife and the detail that he had a butler, Brian. It was said that Saylor looked like Tom Cruise and dated Queen Noor, King Hussein's widow (whom he says he has never met).
"I was delighted to help the world discover Mike Saylor," recalled Bisnow, who left the company last year. The people who criticized Bisnow at MicroStrategy "complained all the way to the bank," he said.
In late 1999 and early 2000, a recurring source of Saylor's fascination -- and, in turn, the media's -- was his plan to build a "Versailles" on 48 acres in Great Falls. He issued a 100-page request for proposals from architects and sent memos to his public relations staff that outlined some basic features he envisioned for his compound -- rooftop conservatory, nine-hole golf course, Japanese gardens. He referred to the compound as "my 21st-century villa," though Bisnow cautioned him that the term "villa" connoted the Italian leisure class, not the intellectual renaissance he was now leading.
"Mike let himself become this image that kept feeding on itself," said his friend, America Online co-founder Jim Kimsey. "After a while it's drinking your own bathwater. After a while it became hubris."
'Hey, Mike, You're Rich'
Saylor had lived a sheltered life: He spent his teenage nights eating ice cream at Friendly's and lifting weights in his garage with his best friends, Griffith and Tom Spahr, who would later join him at MicroStrategy. They played board games and dabbled in Dungeons and Dragons. "Mike was always the Dungeonmaster," Spahr recalled, referring to the player who controls the game. "He liked to create and control situations."
When Saylor arrived at MIT, he had never eaten Chinese food, owned just one suit (beige polyester) and sported a frizzy thin mustache. He confined his friendships mostly to his fraternity, Theta Delta Chi, and had few girlfriends in college or afterward. "Michael recently decided women are an incredible time sink," Bansal told The Post in 1996.
Until recently, Saylor almost never drank. On the eve of his IPO, aboard a Gulfstream II, MicroStrategy Chief Financial Officer Mark Lynch offered Saylor a celebratory glass of Blue Ribbon Scotch from a $160 bottle. Saylor declined, put the glass aside, took a few sips of champagne and devoured two pink Hostess Sno Balls.
After a day of meetings in New York in January 2000, Saylor and Bisnow went to the bar of the Four Seasons hotel only to find a 45-minute wait for a seat. They turned to leave when Bisnow said, "Hey, Mike, you're rich, why don't we do what they do in the movies, hand the maitre d' a big tip and see what happens?" Bisnow handed the guy a $20 bill and the men were seated.
Around that time, Sen. John F. Kerry (D-Mass.) and his wife, Teresa Heinz, invited Saylor to a private dinner at their Georgetown home. Saylor was flattered that a U.S. senator would care to hear his grand ideas, and when Bisnow mentioned that Kerry might also care about his bank account, he seemed surprised. After the dinner, Saylor was asked by a Kerry aide to host a fundraiser, which he did, despite tending toward conservative views and being a lifelong admirer of George Will.
Saylor was always impressed by wealth, not so much for what the money could buy -- although that was enviable too -- but for the power, credibility and status that came with it. "When you're worth a certain amount, you get the attention of everyone in the room," Saylor said in 1998. In preparing for MicroStrategy's IPO that year, Saylor offered to sell "friends and family" stock -- coveted shares that are usually reserved for company insiders -- to a special class of people he dubbed "influencers." These were the top executives at about 200 nationally known firms, carefully selected by Bisnow. About 5 percent of these "influencers" accepted the shares, according to a source familiar with their apportionment.
As Saylor's celebrity and wealth grew, he gained entry into increasingly rarefied Washington circles. He attended several of President Bill Clinton's functions, often arranged by Democratic fundraisers such as Beth Dozoretz. At one reception for Clinton at the Georgetown home of financier Jonathan Silver, the president called on him during a question-and-answer session and Saylor launched into an extended talk about how technology made it possible for every American to carry a panic button, a kind of wireless 911 device. With the proper resources, Saylor said, the government could "significantly cut rape and violent crime." Clinton asked Saylor to send him a memo on the subject, but he never heard back from the White House.
The Wonder Boy of the Club
Most of Saylor's powerful new friends came from the burgeoning club of Northern Virginia entrepreneurs said to be transforming Greater Washington from a plodding government enclave into a hotbed of new money and industry. The members included, among others, Joe Robert and James Kimsey, financiers Mark Warner and Russ Ramsey, and entrepreneurs Mario Morino and Jonathan Ledecky. Saylor sought out their companionship and advice at black-tie functions and private dinners. He recruited Ledecky to join the MicroStrategy board and, later, John Sidgmore, the vice chairman of WorldCom. Saylor spoke of the importance of being a good member of the community and of surrounding himself with mentors.
In return, Saylor was embraced as the oddball wonder boy of the local technology sector. "He was sort of adopted as a pet, a curiosity," said one wealthy local entrepreneur, a friend of Saylor's. In late 1999, Saylor joined Robert, Kimsey and others on a Caribbean cruise on a 165-foot boat belonging to Hollywood super-agent Mike Ovitz. One afternoon, after drinking tequila shots the night before, Saylor went scuba diving and became sick, vomiting his lunch and inciting a feeding frenzy by a swarm of tropical fish. A few weeks later, Kimsey bought Saylor a bottle of fish food for his birthday.
In time, Saylor became weary and suspicious of several of the local multimillionaires who had become his friends. The more successful he became, people at MicroStrategy recall, the more Saylor would speak of how much smarter and more creative he was than the other younger entrepreneurs he was often grouped with. He began to tune out many of the "mentors" he had cultivated, confiding to at least two friends that AOL co-founder Steve Case was the only person in the Washington tech community whom he considered a peer. (Saylor says that this might have characarized his views at various points in the late 1990s, but that he has since become more humble and less judgmental)
As MicroStrategy's share price catapulted ever higher, Saylor became fixated by it, checking several times a day. He knew precisely where the stock had to go for him to be a billionaire, or 10-billionaire. Saylor looked to investors not just for money but for a kind of intellectual ratification. He believed in the stock market's "qualitative ability" to anoint visionaries. "In the marketplace, Nasdaq is the god," Saylor said.
On the days his stock fell, Saylor was more prone to piqueish fits of micro-management. One day in December 1999, Joe Payne, MicroStrategy's vice president of marketing, was flying out of Dulles International Airport on a family vacation when he received a call from Saylor on his cell phone. "You're causing corporate death," Saylor said acidly and asked why a press release announcing a new partnership agreement had not been issued. Payne explained that the new partner was not ready to announce the agreement.
"Well," Saylor said, "it's causing corporate death. The stock is down today. And the reason the stock is down today is because we haven't gotten that press release out."
When the stock rose, Saylor was not good at the practiced indifference that CEOs are supposed to evince, especially in front of their employees. Instead, he would casually walk around the office talking about how many paper millions he'd just made as he ate lunch.
There was an honest ebullience about him that was at once crass and refreshing. On MicroStrategy's annual staff cruise in January 2000, shares rose 19 percent in a single day, and all 1,600 employees were in the Cayman Islands! "We should go on cruises more often," joked Saylor, who made nearly a billion dollars that day, the dot-com fantasy in a nutshell.
Except that Saylor despised the notion that MicroStrategy was comparable to some dot-com-lately, like he was some newly minted MBA starring in an online toy store. This, he felt, ignored his company's 11-year track record, its profits, his huge vision. His was not an "Internet company," he said, it was an "intelligence company."
"In defense of those who were appealing to Michael's egomania, he was several cuts above the dot-commers," Bisnow said. "He had a very solid business software company. And he had these incredible gifts. He could have been someone very memorable, for reasons other than why he ultimately will be."
Seizing a Halo
MicroStrategy could have continued as just a "very solid business software company." But that would not have made Saylor memorable, much less historic. So it became clear to Saylor that for the recognition he felt he deserved, he had to be part of Wall Street's love affair with the Internet. "We were second-class citizens here," Saylor recalled of MicroStrategy's status as a mere "software" company. "And time was running out. We needed to get into that halo box."
This meant trumpeting how his company would thrive in the online world, how Internet and wireless networks could spread freshly mined information "everywhere." He launched a subsidiary, Strategy.com, that delivered information not to businesses but directly to consumers: weather updates, traffic reports, sports scores via phone, Internet or wireless tools.
Of course it was just a start in the context of the larger dream Saylor was peddling: One day soon, he promised, people would have devices in their ears that would tell them how to avoid clogged highways or incompetent heart surgeons or dangerous neighborhoods. Such intelligence would circulate "everywhere," cleansing waste, inefficiency and risk from our networked ecosystem. It sounded slightly nutty, but when Saylor was preaching, it could sound oddly imminent, too.
On Jan. 27, 2000, MicroStrategy announced that its revenue for 1999 would be $205.3 million, nearly double the previous year's. Saylor announced the company's 16th consecutive quarter of revenue growth and a profit of $3.8 million. The new numbers solidified his cachet as an Internet visionary who could actually make money. He was profiled on "60 Minutes," in Time and Newsweek (headline: "Caesar and Edison and . . . Saylor?"), and the framed press clippings he hung in his basement began to trail up the staircase and into the first floor of his house.
Shares of MicroStrategy jumped from $225 to $246 on March 7. The price continued upward as Saylor, Mark Lynch and Nick Weir, the head of Strategy.com, began their roadshow in Europe. Investors in London, Geneva and Paris begged to buy the increasingly pricey shares. The stock closed that Thursday, March 9, at $283.
On Friday, Saylor, Lynch and Weir flew back to Washington, with plans to begin the U.S. leg of the roadshow on Monday. On the people mover at Dulles, they checked messages and learned that shares of MicroStrategy had jumped another 30 points. The stock closed that day at $313 after hitting $333 in the early afternoon. Saylor had made another $1.3 billion while he crossed the Atlantic. He was now worth $13.6 billion.
"Do you ever get the feeling things are going just a little bit too well?" Saylor said to Weir as Saylor stepped into his waiting limousine.
"Yes," Weir said, "and it scares the hell out of me."
Staff researcher Richard Drezen contributed to this report.
Next: Damage control.
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