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Technology Stocks : MicroStrategy Inc. (MSTR)

MSTR 199.75

-4.2%

Nov 14 3:59 PM EST

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To: Rajiv who wrote (244)	10/30/1998 12:10:00 PM
From: Rajiv	Read Replies (1) of 717

Comments about the CC <Note : I am short MSTR and hence my interpretation of the CC might be biased> - The management is obsessed with "beating estimates". We were reminded at least half a dozen times that they beat estimates. - The management had claimed during the IPO road shows that their business model should generate a scenario where the DSO is between 70 and 90. However, this quarter's results shows a DSO for 99. They expect to take care of it in the current quarter (I will be surprised if they succeed in reversing the trend of increasing DSO's). - For this quarter, the services part of the revenues was higher than the guidance provided by the management ( This should be a legitimate concern of shareholders as the licenses component typically has higher margins. You can find lots of companies specializing in "services" trading at PEs of 10-15). The explanation for this, was not very convincing. Saylor managed to give a lecture on how they are aiming to develop a long-term relationship with analysts/shareholders, etc. Their long-term objective is 70% licenses, 10% services, 15% maintenance and 5% education. - The "cash and cash equivalents" went down by 10 million. This was because of the rise in accounts receivable, expenditure on capital equipment (computers) and payment of 2.5 millions (out of the 10 Mil.) towards the dividend note. - Lots of name-dropping. Saylor managed to mention AMZN twice during the CC. He also mentioned EBAY. Saylor is attempting to project an impression that MSTR provides software to e-commerce companies. Note - AMZN, EBAY, etc. are not customers. - ShopKo is an existing customer. The new deal indicates that ShopKo is enlarging the scope of their relationship. - 24% of their revenues is generated from outside the U.S. - On being asked to elaborate on their relationship with NCR (the analyst referred to the press releases), Saylor started telling that they have similar relationship with around 13 companies. He managed to tell 6 names, paused for a few moments and realized he does not even remember the names of the other firms. (This is a perfect indicator that their press releases which average around 1/day are almost meaningless) - They expect to have 1000 employees by the end of the year. We were told by Saylor that the long-term goal is to have "thousands" of employees. I put this list together after the CC and therefore had to depend on my memory. Hint - Please be kind if I have made any mistakes. Regards. Rajiv

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