- The Washington Times - Tuesday, June 20, 2000

MicroStrategy Inc. Chief Executive Officer Michael Saylor sought yesterday to assure shareholders that the technology company is on track for success, despite the earnings flap in March that sent its shares plunging.

The Vienna, Va.-based company also announced that it raised $125 million from the sale of convertible preferred stock, news that sent its shares up 10 percent yesterday.

"The tone of the meeting was very positive," said Michael Quint, spokesman for MicroStrategy, which makes software that analyzes corporate data on marketing and customer relationships.

Yesterday's shareholder meeting was the first since MicroStrategy announced in March that it had to revise its revenue figures for 1997 and 1998.

The news angered company shareholders, who have filed more than a dozen lawsuits against the company.

Mr. Saylor sought to assure shareholders during the three-hour meeting that the company would grow and he talked about new MicroStrategy products.

"I think we've all gone through a pretty gut-wrenching experience over the last 12 weeks," Mr. Saylor said at the meeting, which was open to the media. "We have to move forward as constructively as possible."

MicroStrategy also will work to improve its public image. It plans to make a short video with charts and graphs talking about the company's growth.

"Right now the focus will be on execution, and will the company continue to execute, given the adversity of their financial restatement," said Steve Abrahamson, an analyst with Prudential Securities in San Francisco.

Now that MicroStrategy has $125 million in capital, it can continue its growth strategy, analysts believe.

Robert Tholemeier, an analyst with First Security Van Kasper in Punta Gorda, Fla., said shareholders have nothing to worry about because MicroStrategy provides a software product that no other company makes.

"They were never exactly elegant in their software or their market. But the other four [competitors] are completely gone, so they own the category," Mr. Tholemeier said. "And I think these guys are serious and aggressive, and they really have a vision of a different world, and work hard at getting there."

Company officials echoed Mr. Tholemeier's assessment.

"There is a growing need for software to analyze large databases; therefore, there is a tremendous market for our core enterprise business," Mr. Quint said.

MicroStrategy's troubles began in March when the Securities and Exchange Commission reported that MicroStrategy and some 32 other companies including Raytheon Co., Monsanto Co., Scotts Co., the Limited Inc. and Amtech Systems Inc. inflated sales by recording revenue immediately from contracts that would stretch out over years.

MicroStrategy then reduced its reported revenue for 1999 to $151.3 million, down from the previously reported $205.3 million. The change sank profits from a reported gain of 15 cents per share to a loss of 44 cent per share.

The company also revised its financial reports for 1998 and 1997. Revenue for 1998 changed to $95.5 million from a reported $106.4 million, while for 1997 it was revised to $52.6 million, down from the previously reported $53.6 million.

After the revisions, investors pushed shares down from a high of $313 March 10 to the $20s and $30s on the New York Stock Exchange.

Yesterday shares jumped 10 percent to close at $42.44 from $38.56 Friday.

Mr. Tholemeier said he feels more comfortable recommending MicroStrategy to investors now than when its shares were skyrocketing.

"The contracts are still there," he said. "They just have to recognize them slower … . All these changes will help over the long term."

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