MicroStrategy Inc. (MSTR) Message Board

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Technology Stocks : MicroStrategy Inc. (MSTR)

MSTR 224.58

-2.9%

3:59 PM EST

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To: Roland Ott who wrote (274)	1/4/1999 3:12:00 PM
From: Bob Trocchi	Read Replies (1) of 717

Roland... I have no crystal ball but the reasons I have shorted MSTR include the following: 1. Huge market Cap of 1.2B as of 12/31 2. P/S of 12.7 this is quite high for a SW company even though they have some web based “stuff.” 3. Book Value of only $1.2 dollars per share. That is a long way from the current price of 30/sh. 4. P/E of over 300! If they can increase sales revenue by 124 % and increase profit margin from current 4.4% to 7% (and that is a huge % increase when you are expanding as fast as they are) they will achieve approx. earnings of 0.40/sh and a P/E of 75! That is based on their current price of $30/sh. hard to believe they can do that but who knows. 5. Currently have negative cash flow. This can change quickly however so it bears watching. 6. They have no backlog. That is typical of SW companies however it does mean that they must continue significant Q over Q growth. One slip up and Wall Street sometimes have no mercy. Without any backlog, this is risky at their lofty price per share. 7. Analysts rating of 3 moderate buys and 2 holds is not in my opinion a ringing endorsement. 8. Competition. Read the latest 10Q filing for a detailed (company appears to be very open and honest in their assessment of competition) review of competition. 9. Strategy Execution needs to be excellent. They are adding people (according to the 10Q) very rapidly. They are also rapidly adding VARS, etc. for indirect sales. This is interesting in that they claim to add sales to sell big accounts and at the same time are adding VARS, etc. Can this cause channel conflict down the road and irritate the very VARS that they are depending upon? 10. Dependency on success of W/NT for large accounts. Their SW does not run on UNIX. While I am convinced that W/NT will someday be a success, in large companies, UNIX is still the most popular op sys. MSTR does not intend to bring out a UNIX version according to the 10Q. Thus my bottom line is that they must execute perfectly in a somewhat crowded market place, the addition of data warehousing not withstanding. I am saying they will not succeed to the extent that their stock is currently priced. I surely have been wrong before and I expect that I will be wrong many times more in the future. Time will tell. We have placed our bets. Good Luck Bob T.

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