From: Adam Rifkin -4K (adam@XeNT.ics.uci.edu)
Date: Tue Mar 21 2000 - 15:35:14 PST
> Hoorah! MSTR tanks...
> Down from $333 to $100 -- Rohit
It actually hit 63 today. The downward spiral continues. The
interesting thing is that the restatement came because MicroStrategy was
filing a $610 million secondary to get the money to build out
www.strategy.com, and the SEC required the restatement *because* of the
secondary. But as far as I know (as an investor), most software
companies regularly do "cookie jar accounting" by blurring the lines
between revenue periods. I've recalled Oracle getting pounded because
they were too aggressive with their revenue declarations and had to
So the irony is, MicroStrategy had to do a restatement because they
wanted to do a secondary, but now because of the restatement they cannot
have the secondary, and they can't build out www.strategy.com ...
Also, it's not like the tanking made MicroStrategy's stock cheap; Matt,
a friend of mine and Rimpinths', wrote this about their stock: "Even
after yesterday's 60% drop and today's 13.5% drop, it's still a $6 bil
company that trades @ 300x projected 2000 earnings ($75/.25). And
that's the old earnings estimate that the SEC is making them revise
Rohit forwarded yesterday:
> Microstrategy hit by restatement
> Software firm to report loss after change
My www.strategy.com setup has been acting really weird for the last
week, often sending me negative price quotes, sometimes double or triple
sending notifications (a really annoying "feature" MSN Mobile also has),
and sometimes dropping notifications (a really really annoying feature).
With MicroStrategy down another 16% today to the 70s, let the
class-action lawsuits begin...
> March 21, 2000, 12:27 PM PST
> MicroStrategy Faces Five Class-Action Suits
> As Nasdaq investors continue to punish the company for its accounting
> practices, legal sharks have started to circle.
> By Keith Perine
> WASHINGTON - Even as Nasdaq investors continue to punish MicroStrategy
> (MSTR) for its artful accounting practices, the legal sharks have
> started to circle.
> On the heels of a major revenue revision announcement and a free fall of
> $140 yesterday on the Nasdaq, at least five law firms have filed broad
> class-action suits against MicroStrategy in various federal courts. The
> suits charge the company, and some of its directors and executive
> officers, with issuing "materially false and misleading financial
> statements that materially overstated the Company's revenue, earnings
> and income," according to a press release issued by one of the firms.
> MicroStrategy announced yesterday that it is revising its 1998 and 1999
> revenue statements to reflect changes in how it counts income from
> complex contracts. The company had been counting much of the revenue up
> front, sometimes even in closed financial quarters, using accounting
> methods that increasingly are being called into question.
> The company has reduced its 1999 revenue figures to somewhere between
> $150 million and $155 million from $205.3 million. It now will report a
> loss of between 43 cents and 51 cents per diluted share for 1999,
> instead of a profit of 15 cents per diluted share. Revenue figures for
> 1998 dropped to between $95.9 million and $100.9 million from $106.4
> million. Diluted net income per share for 1998 dropped from 8 cents to
> between 1 and 4 cents.
> The Vienna, Va.-based software and services company was way out in front
> of a drop in Nasdaq tech stocks yesterday, plunging $140 to close at
> $86.75. At close of trading today, shares dropped $11.75, or 14 percent,
> to $75. MicroStrategy has declined to comment.
> Several media outlets have joined the law firms in piling on
> MicroStrategy and its brash CEO, Michael Saylor. The Washington Post,
> which normally fawns over Saylor and his company, called him a
> "fuzzy-cheeked mogul" and published a list of "the top 10 ways losing
> $10 billion cramps your lifestyle."
> Two of the law firms that have filed suit - Schiffrin & Barroway of Bala
> Cynwyd, Penn., and Abbey, Gardy and Squitieri of New York - have
> declined to comment. Three other firms - Cauley & Geller LLP of Boca
> Raton, Fla., as well as Bernstein Liebhard & Lifshitz and Milberg Weiss,
> both of New York - didn't return telephone calls seeking comment.
> "The facts are not in question, the contracts are good, and all the
> revenue's going to come," MicroStrategy's Saylor said yesterday.
> So far, though, Saylor's bravado has failed to calm market jitters. Nor
> has it scared away the lawyers, who smell his company's blood in the
> MicroStrategy Pays the Honesty Tax
> March 21, 2000
> Shares of business software company MicroStrategy (MSTR) shed 62 percent
> of their value Monday after the company revealed a new revenue figure
> for 1999. 'That profit we mentioned earlier was actually a loss,' the
> company announced. Oh. MicroStrategy hadn't simply forgotten to carry
> the 2; there has been some debate about its accounting methods. The
> company had been back-reporting revenue into quarters that had already
> closed, according to the Merc. That, says the SEC, brings bad karma.
> MicroStrategy has gotten all the press, but according to the Merc, many
> software companies recognize revenue the old MicroStrategy way. The
> company, said the Merc, is "just the latest in almost three dozen
> companies that have adopted more conservative methods to account for
> revenue." Investors have already started fretting, according to the
> Wall Street Journal - selling off shares of companies whose only crime
> was that they were in the same line of business as MicroStrategy.
> Surprisingly, not every journalist took the chance to swipe at a cocky
> Netco. The New York Times balanced its revenue-restatement story with a
> pleasant profile of MicroStrategy's flamboyant chairman, Michael Saylor.
> MicroStrategy's hometown newspaper, the Washington Post, practically
> shrugged off the stock slide in a generally positive piece.
> The New York Times said accounting analyst Howard Schilit had questioned
> MicroStrategy's revenue reporting in October, and Forbes magazine
> followed with an article last month. "Sometimes hard work and excellent
> reporting gets results," wrote Forbes' Om Malik of David Raymond's
> MicroStrategy article; Malik claimed that the company's revenue revision
> was "a direct result of that story." If the New York Times is correct,
> Raymond did not originally break the news. But either way, Malik's piece
> did not substantiate the "direct result" statement.
> The revenue hoopla is only MicroStrategy's most recent foray into the
> headlines. Last week, Saylor pledged $100 million to start a free online
> university that would be staffed by a volunteer squad of celebrity
> geniuses. Saylor has retained the same wacky idealism in the face of
> MicroStrategy's plummeting stock price. "Mother Teresa never quit in a
> down quarter and what we're doing is equally important," Saylor told
> Reuters. Saylor may not be Mother Teresa, but remaining that optimistic
> after losing $6.1 billion must surely take the patience of a saint.
> -- Jen Muehlbauer
I do like what Option Investor Newsletter wrote about the tanking...
> Before the market opened this morning, Microstrategy's (MSTR)
> CEO, Michael Saylor bowing to SEC pressure, announced MSTR would
> restate 1998 and 1999 earnings such that revenue would be
> recognized when revenues are received, not when they are earned.
> Though it does not affect the cash flow one iota (a point driven
> home by analysts and Mr. Saylor, translating on paper makes the
> FY99 earnings result look really ugly - a $0.15 profit will now
> need to be restated as a $0.43-$0.51 loss. For its troubles,
> this former high flyer that had traded as high as $333 on March
> 10, was taken to woodshed where it had $140 spanked out of it by
> the market's big hand. That was not a misprint - down $140 on
> the day to close at $86.75 on volume of 43 times (gulp!) its average
> of roughly 400 K shares. Yes, more than the entire float traded
> hands today. In a related item, Merrill Lynch earns the "Lock-
> up-the-barn-after-the-animals-have-escaped" award for their not
> so daring downgrade of MSTR to Accumulate following this
> morning's announcement - DUHH!! Talk about late to the party!!
Is there any non-clunky way to carry a Motorola i1000+, a Palm V with Omnisky, a Skytel RIM 2-way Blackberry pager, a Neopoint with Sprint Wireless Web, and a Sony Vaio all at the same time wherever I go?
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