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Strategy Annual Report, Year Ended Dec 31, 1998

Filing Date
Filed March 25, 1999
Period End
December 31, 1998
In the record · 2016–202610-K1110-Q338-K265

MSTR filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 265 current reports (8-K) between 2016 and 2026.

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01—Abstract

Summary

Summary of the 10-K filed March 25, 1999. Cited figures are marked; the original filing is the authoritative source.

MicroStrategy Incorporated, filed under that name, reports its 10-K for the year ended December 31, 1998.

The company describes itself as a leading worldwide provider of enterprise decision support system (DSS) software applications and related services, with its DSS Suite product family. Total revenues rose to $106.4 milliona in 1998 from $53.6 million in 1997, an increase of 98.5%, with product licenses at $72.7 million and product support at $33.7 million. Income from operations was $9.3 million, and net income was $6.2 million, or $0.16 per diluted share, after a $3.4 million income tax provision that reflects the company's termination of its S corporation status in connection with its June 1998 initial public offering.

The balance sheet strengthened over the year. Cash and cash equivalents reached $27.5 millionb, total assets were $82.7 million, and stockholders' equity was $46.3 million at December 31, 1998. Cash used in operations was $2.5 million, reflecting a $17.5 million increase in accounts receivable.

The company raised $48.1 millionc net from its June 1998 IPO and a further $40.1 million net from a February 10, 1999 secondary offering of 1,585,000 Class A shares. The company had no outstanding borrowings under its business loan at year end and subsequently expanded that facility to $25.0 million. Investors should note a few risk factors stated in the filing.

Chairman and CEO Michael J. Saylor, through Alcantara LLC, is stated to control 72.6%d of voting power via Class B shares carrying ten votes per share.

The filing also discloses concentration of revenue in quarters' final weeks, a sales cycle of nine months or more, reliance on channel partners that accounted for 35.0% of 1998 revenues, and international revenues of 23.6% of the total. The company reported 907 employees at December 31, 1998.

02—Key points

Key Highlights

  1. Total revenues increased 98.5% to $106.4 million in 1998 from $53.6 million in 1997.
  2. Product license revenues were $72.7 million and product support revenues were $33.7 million in 1998.
  3. Net income was $6.2 million, or $0.16 per diluted share, compared with $121 thousand in 1997.
  4. Cash and cash equivalents rose to $27.5 million at December 31, 1998, from $3.5 million a year earlier.
  5. The company completed its initial public offering on June 12, 1998, raising $48.1 million net, and sold 1,585,000 additional Class A shares on February 10, 1999 for $40.1 million net.
  6. Michael J. Saylor, through Alcantara LLC, is stated to control 72.6% of voting power through Class B shares.
  7. Channel partners accounted for 35.0% of 1998 revenues, and international revenues were 23.6% of the total.

03—Questions

Frequently Asked Questions

  1. How did MicroStrategy perform financially in 1998?

    Total revenues were $106.4 million, up 98.5% from $53.6 million in 1997. Income from operations was $9.3 million, and net income was $6.2 million, or $0.16 per diluted share, after a $3.4 million income tax provision.

  2. How much cash did the company have and how was it raised?

    Cash and cash equivalents were $27.5 million at December 31, 1998. The company raised $48.1 million net in its June 1998 initial public offering and an additional $40.1 million net in a February 10, 1999 secondary offering. The company had no outstanding borrowings under its business loan at year end.

  3. Who controls the company's voting power?

    The filing states that Class B common stock carries ten votes per share, and that Chairman, President and CEO Michael J. Saylor, through his sole ownership and control of Alcantara LLC, will control 72.6% of voting power following the February 1999 offering.

  4. What are the main risks identified in the filing?

    The filing cites a limited operating history, quarterly results that fluctuate significantly, long sales cycles of nine months or more, intense competition, reliance on key personnel and channel partners, dependence on the Windows NT operating system for the application server, and Year 2000 issues affecting customers.

04—Continue

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