MicroStrategy’s CEO Makes Apology
HERNDON, Va. (AP) _ MicroStrategy Inc. founder and chief executive Michael Saylor apologized to shareholders Monday for accounting problems that caused the company’s stock price to plunge and led to a federal investigation.
``I feel deeply sorry about it,″ Saylor said during the Vienna company’s annual shareholder meeting.
Despite the problems, Saylor predicted a rosy future for his software company, saying none of his top employees have left and the company continues to hire workers and churn out top-notch products. The company also announced that it had raised $125 million through a complex stock deal.
MicroStrategy became the poster child for accounting problems in the high-flying technology industry in March when it announced it was revising its revenue figures. The Vienna company’s value plunged 62 percent in one day, and Saylor’s personal holdings fell by $6 billion.
Shareholders asked Saylor about lawsuits filed against MicroStrategy and accounting firm PricewaterhouseCoopers, which approved the financial statements, but there were no angry outbursts or accusations that might be expected. Saylor presented several slick video montages of happy employees and company highlights, prompting one shareholder to say it was the most upbeat meeting he had ever attended.
Afterward, shareholder Holger Opderbeck said the lawsuits remain ``the biggest clouds″ over MicroStrategy’s future. He was pleased with Saylor’s explanation that MicroStrategy was assembling a top legal team to fight the suits.
``The fact the company has held together is very positive,″ said Opderbeck, who added that he was not among the shareholders who lost money in March.
Analysts have said the company remains sound because its products are good.
MicroStrategy’s problems stem from new accounting guidelines issued by the Securities and Exchange Commission in December that are meant to crack down on overly rosy projections and give investors a more accurate picture of how a company is performing.
For Internet companies that have small or no profits, the ability to show strong revenues is key.
MicroStrategy officials said in March that they improperly counted too large a portion of revenue from multiyear contracts in the first year rather than spreading those revenues out over the length of the deals. Consequently, revenues for the past three years were revised.
Revenue for 1999 sank to $151.3 million, down from the previously reported $205.3 million. Earnings sank from an initial gain of 15 cents per share to a loss of 44 cents per share.
MicroStrategy, which makes software that analyzes corporate data on marketing and customer relationships, also revised its financial statements for 1997 and 1998.
It also has acknowledged the SEC is investigating its accounting practices.
MicroStrategy’s stock was up $3.875, or 10 percent, to $42.438 at the end of regular trading on the Nasdaq Stock Market. Earlier this year, shares hit a high of $333.
Since the SEC released Staff Accounting Bulletin 101, it has delayed the deadline for compliance to June 31 from the original deadline of March 31. Dozens of companies have since changed their accounting practices or warned that they are evaluating the potential impact of such changes.
Because of questions from corporations, ``there is talk the SEC may delay the deadline even further,″ said Janet Pegg, an accounting analyst with Bear Stearns & Co.
She declined to guess how many companies are struggling with compliance.
But, Pegg said, the next telling period for investors will come in July, when companies that run on a calendar year basis report their second quarter results.
``There are definitely a lot of companies out there that are thinking long and hard about 101.″
On the Net: http://www.microstrategy.com