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MicroStrategy Admits Investigation

April 13, 2000

VIENNA, Va. (AP) _ MicroStrategy Inc., which has been hammered by investors after admitting it would have to restate earnings for the past few years, said Thursday it is under investigation by the Securities and Exchange Commission over the financial statements in question.

The revelation appeared in the company’s annual report filed with the SEC, which also contained revised earnings figures for the past three years.

Investors responded by pushing shares down 8 percent, or $3.43 3/4, to $39.06 1/4 in trading on the New York Stock Exchange. Its 52-week high is $333.

The company reduced its revenue for 1999 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 also revised its financial statements for 1997 and 1998. Revenues for 1998 were $95.5 million, down from the previously reported $106.4 million, while 1997 revenues were dropped to $52.6 million, from $53.6 million.

The report was released with the concurrence of PricewaterhouseCoopers, the auditing firm that approved the earlier earnings reports.

MicroStrategy said it was cooperating with the SEC investigation.

SEC spokeswoman Joanne Cronrath Bamberger declined comment, in keeping with the agency’s practice. ``We can neither confirm nor deny the existence or non-existence of an investigation,″ she said.

The revisions come amid criticism that some technology companies have overstated their earnings to drive up share prices. Recent guidelines from the SEC have caused other companies to also restate their earnings.

MicroStrategy chief executive Michael Saylor said back in March that the erroneous earnings reports were the result of the increasingly complex nature of its contracts, which have ballooned in value.

The company, which makes software that analyzes corporate data on marketing and customer relationships, said it booked too large a portion of revenue for multiyear contracts in the first year rather than spreading those revenues over the length of contracts.

Analysts have said the company remains on solid footing, however because its products are good, regardless of the accounting problems.

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