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Technology Stocks : MicroStrategy Inc. (MSTR) -- Ignore unavailable to you. Want to Upgrade?

To: Area51 who wrote (650)	3/12/2001 2:30:40 AM
From: Carl R.	Read Replies (2) \| Respond to of 717

I hadn't looked at this one in awhile. I note that the price is now close to my "target" value of $5. The balance sheet shows $93 million in cash, but of that $25 million is "restricted". I don't have time to look up exactly what the terms of that are. This leaves $68 million in cash. As for debt, they do have plenty, so I take issue with your statement that they have none. The biggie is that they almost $100 million in "accrued litigation settlement". That is a pretty good chunk, but again, I don't have the time to ascertain the terms. If it is due in the next several years it will be quite a burden. Even if it is to be paid over say 10 years, that would be $10 million a year, and perhaps would also bear interest. And then there is the $160 million in redeemable preferred. Normally on redeemable issues the company must repurchase the redeemables over some long period, say 10 years. Once again, I haven't looked up the terms, but if they have to pay them off over 10 years, that would be $16 million a year or $4 million a quarter. Thus if these items are both payable over 10 years, that implies payments of $26 million a year on top of any losses. So let's turn to operations. Excluding interest, amortization, litigation settlements, etc, the core company had revenues of $58 million, and gross profits of $35 million. After deducting the still huge R&D and Marketing budgets, as well as G&A, they have an operating loss of $25.5 million. Let's assume that they are only marginally impacted by the slowdown in the economy and things get no worse. That would imply cash losses from operations of $100 million a year, and then perhaps payments on the redeemables and settlement of another $26 million. Given that rate of consumption of cash they could burn through what they have left pretty quickly. I think that their only recourse is probably to repay the redeemables with shares, which will of course immediately be sold, driving the stock price down. Then let's look at book value. Total shareholders equity is -$145 million. After deducting the intangibles, the tangible book value is -$179 million, not a pretty sight. No, I don't think they will make it, though they will probably linger on for several more years. This balance sheet reminds me of AXC (with the exception of the litigation settlement). Over time the operating losses and redeemable payments in shares took its toll on that once great company. On the other hand, I see that there are only about 5 million shares short out of 79 million outstanding, so this company isn't all that heavily shorted. Therefore it apparently isn't a forgone conclusion that they are doomed. I'm probably missing something so perhaps someone can explain it to me. As for buying it "again", I've never owned it before, so I can't buy it again. The only order I ever put in was a short order at 240, and it didn't fill that day, and though I had more chances to short it again later at even higher prices, I never did. Carl