From: Rohit Khare (firstname.lastname@example.org)
Date: Mon Mar 20 2000 - 09:39:00 PST
Down from $333 to $100 -- Rohit
Microstrategy hit by restatement
Software firm to report loss after change
By Greg Morcroft, CBS MarketWatch
Last Update: 12:24 PM ET Mar 20, 2000
NEW YORK (CBS.MW) -- Shares of Microstrategy lost more than half
their value Monday, as investors dumped stock in the business
software firm after it said its first quarter results will not meet
analysts' estimates because of a change in accounting methods.
The company said it was adjusting its results "to conform to the most
recent statements of the Securities and Exchange Commission and the
accounting profession regarding revenue recognition in the software
industry." Therefore the company said it was adopting contract
accounting for its software sales that include service relationships.
According to First Call, analysts's consensus estimate for the first
quarter was a profit of one cent per share.
Contract accounting spreads the recognition of revenues over the
entire contract period as opposed to separating it between the
software and services components. The effect of these revisions is to
defer the time when revenue is recognized for large, complex
contracts that combine both products and services, the company said.
The company also said it is restating its 1999 full year results to a
loss of 43 cents to 51 cents per share, rather than a previously
expected profit of 15 cents per share.
The company also said the accounting changes will reduce its 1999
reported revenue from $205.3 million to between about $150 million
and $155 million.
Microstrategy (MSTR: news, msgs) said "correspondingly, deferred
revenue at December 31, 1999 will increase from $16.8 million to
between approximately $66.5 million and $76.5 million. The Company
will also reduce its reported revenues for 1998 from $106.4 million
to between approximately $95.9 million and $100.9 million, and its
results of operations from diluted net income per share of eight
cents to diluted net income per share of between approximately four
cents and one cent."
The company also said it will postpone its plans for a proposed
follow-on public offering of securities at this time
"We want to to assure investors, customers and partners that we are
working proactively with our auditors to comply with the evolving
accounting practices for the software industry. There is no material
change in our net cash flow and the amount of revenue we expect to
recognize, and we continue to be well positioned to take advantage of
opportunities in the e-business software and personalized wireless
content markets," said Microstrategy President and CEO Michael J.
MicroStrategy is a worldwide provider of business software and
Greg Morcroft is New York news editor for CBS MarketWatch.
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