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Strategy Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed March 10, 2006
Period End
December 31, 2005
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 10, 2006. Cited figures are marked; the original filing is the authoritative source.

MicroStrategy Incorporated, filed under that name on March 10, 2006, reported total revenues of $268.7 milliona for fiscal 2005, up from $231.2 million in 2004, and income from operations of $93.9 million versus $68.5 million the prior year.

Net income was $64.7 millionb, or $4.19 per diluted share, compared with $168.3 million in 2004, which had included a $99.0 million income tax benefit from releasing a valuation allowance. Product licenses revenue rose modestly to $99.9 million, while product support and other services revenue grew to $168.7 million. International sales accounted for 38.4% of total revenues in 2005, versus 40.7% in 2004.

Balance sheet and capital allocation shifted notably in 2005. Cash, cash equivalents and investments totaled $96.1 millionc at year-end, down from $132.5 million, as the company repurchased 2,607,145 Class A shares for $134.5 million under its 2004 and 2005 share repurchase programs. Stockholders' equity fell to $180.7 million from $240.6 million, and the accumulated deficit narrowed to $112.9 million.

Management stated that existing cash and operating cash flow are expected to be sufficient for working capital and capital expenditures for at least the next twelve months. The filing highlights significant risks. Michael J.

Saylor controls roughly 66.3%d of total voting power through Class B shares, limiting minority shareholders' influence over corporate matters. The company is also engaged in ongoing patent and trade secret litigation with Business Objects, S.A. and Crystal Decisions. On January 23, 2006, the court entered judgment in favor of Business Objects and against MicroStrategy, with any notice of appeal due by March 27, 2006, and the outcome is described as not presently determinable.

02—Key points

Key Highlights

  1. Total revenues rose to $268.7 million in 2005 from $231.2 million in 2004, with product support and other services growing to $168.7 million.
  2. Income from operations increased to $93.9 million from $68.5 million, while net income was $64.7 million, down from $168.3 million in 2004 due to a $99.0 million tax benefit recorded that year.
  3. Diluted earnings per share were $4.19 for 2005, compared with $9.83 for 2004.
  4. The company repurchased 2,607,145 Class A shares for $134.5 million during 2005, and cash, equivalents and investments declined to $96.1 million from $132.5 million.
  5. International sales represented 38.4% of total revenues in 2005, down from 40.7% in 2004.
  6. Class B shareholders, led by Chairman and CEO Michael J. Saylor, hold 76.4% of total voting power, giving controlling influence over corporate actions.
  7. Patent and trade secret litigation with Business Objects remains unresolved, with an adverse judgment entered February 23, 2006 and an appeal deadline of March 27, 2006.

03—Questions

Frequently Asked Questions

  1. How profitable was MicroStrategy in 2005 compared with 2004?

    Net income was $64.7 million in 2005, versus $168.3 million in 2004. The 2004 figure was inflated by a $99.0 million income tax benefit from releasing a valuation allowance. Income from operations rose to $93.9 million from $68.5 million, reflecting higher revenue.

  2. What did the company do with its cash in 2005?

    MicroStrategy spent $134.5 million repurchasing 2,607,145 shares of Class A common stock under its 2004 and 2005 share repurchase programs. The 2005 program authorizes up to $300.0 million, and the company repurchased a further 635,526 shares for $58.8 million between January 1 and March 1, 2006.

  3. Who controls the company's voting power?

    Class B common stock holders own 76.4% of total voting power as of March 1, 2006, and Michael J. Saylor beneficially owned shares representing 66.3% of total voting power. Class B shares carry ten votes each, so Mr. Saylor can determine the outcome of director elections and other stockholder votes.

  4. What legal risks does the company face?

    The company is in long-running litigation with Business Objects, S.A. and Business Objects Americas, Inc. and with Crystal Decisions. A judgment was entered in favor of Business Objects on February 23, 2006, with any notice of appeal due by March 27, 2006. The filing states the outcome is not presently determinable and no provision has been recorded.

  5. Is the company paying dividends?

    No. MicroStrategy has never declared or paid cash dividends on either class of common stock and has no current plans to do so.

04—Continue

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