MicroStrategy Restates Quarterly Earnings

FRAMINGHAM (05/04/2000) - MicroStrategy Inc. yesterday restated its quarterly financial results for last year, leaving the once high-flying maker of data analysis software with losses in each of 1999's four quarters.

The Vienna, Virginia-based company had already restated its results for last year as a whole, saying three weeks ago that last year's revenue was being adjusted from $205.3 million to $151.3 million. The company's results for 1998 and 1997 were also restated at that time in an effort to comply with new revenue-recognition guidelines that the Securities and Exchange Commission (SEC) issued in December.

The restatements prompted a rash of shareholder lawsuits and triggered an investigation of MicroStrategy by the SEC (see story). And last week, the company continued the stream of bad news by reporting a $32.9 million loss for the first quarter of this year.

Yesterday's detailed restating of MicroStrategy's results for last year didn't seem to overly bother investors on Wall Street. Earlier this afternoon, the stock was trading at slightly over $26, up from Wednesday's closing price of $24.75. But that's still far off the high of $333 that the company's stock fetched before all the problems surfaced.

Last year's results were restated in the following way:

- First-quarter revenues went down from $35.8 million to $29.3 million, resulting in a net loss of $3.8 million.

- Second-quarter revenues were reduced from $45.6 million to $40.5 million, producing a net loss of $3,000.

- Third-quarter revenues were lowered from $54.6 million to $35.3 million, creating a net loss of $12.8 million.

- Fourth-quarter revenues were dropped from $69.4 million to $46.2 million, leaving a net loss of $17.2 million.

Henry Morris, an analyst at International Data Corp. in Framingham, Massachusetts, said that even with the restatement of its numbers, MicroStrategy has shown good sales growth. The company's efforts to diversify into more markets also should help its long-term prospects, he added.

For example, MicroStrategy has expanded its presence in the customer relationship management business and has also begun delivering information to subscribers of its Strategy.com service, which delivers personalized information to consumers via telephone calls, wireless devices and the Internet.

MicroStrategy is still in good shape overall and is moving in the right direction strategically, Morris said. But he noted that Wall Street tends to be pretty punishing when companies restate their financial results.

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