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Strategy Annual Report, Year Ended Dec 31, 2007

Filing Date
Filed February 19, 2008
Period End
December 31, 2007
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 February 19, 2008. Cited figures are marked; the original filing is the authoritative source.

MicroStrategy Incorporated's Form 10-K for fiscal year 2007 reports total revenues of $350.7 milliona for 2007, up from $313.8 million in 2006, with net income of $58.5 million (diluted EPS $4.55) versus $70.9 million in 2006.

Product license revenues declined 6.6% to $100.3 millionb, while product support, services and other revenues rose to $250.3 million. Income from operations was $88.2 million, down from $99.8 million, and total stockholders' equity fell to $103.3 million from $133.2 million, largely due to $89.0 million of share repurchases during 2007. The core business intelligence segment generated $328.3 million of revenue, with Alarm.com ($15.3 million) and Angel.com ($7.1 million) described as non-core businesses under strategic review.

Cash, cash equivalents and investments were $85.2 millionc at year-end, and management stated that existing cash and operating cash flow would be sufficient for at least the next twelve months. Net cash provided by operating activities was $97.9 million. The filing highlights a pending patent infringement suit by Diagnostic Systems Corp. (a subsidiary of Acacia Technology Group) over U.S. Patent No. 5,537,590, with an outcome the company states is not presently determinable and no provision recorded.

Class B shares carry ten votes each, and Michael J. Saylor controls the company through his voting power, with holders of class B common stock owning 75.1%d of total voting power as of February 1, 2008.

02—Key points

Key Highlights

  1. Total revenues grew to $350.7 million in 2007 from $313.8 million in 2006, while product license revenues declined 6.6% to $100.3 million.
  2. Net income was $58.5 million (diluted EPS $4.55) in 2007, compared with $70.9 million (diluted EPS $5.20) in 2006.
  3. Product support, services and other revenues reached $250.3 million, with product support revenues in the core BI business up 16.5% year over year.
  4. Income from operations declined to $88.2 million from $99.8 million, with sales and marketing expenses rising to $111.6 million.
  5. The company repurchased $89.0 million of class A stock in 2007 and total stockholders' equity decreased to $103.3 million from $133.2 million.
  6. Cash, cash equivalents and investments totaled $85.2 million at December 31, 2007, and operating cash flow was $97.9 million.
  7. Pending patent litigation by Diagnostic Systems Corp. has an outcome the company states is not presently determinable, with no provision recorded.

03—Questions

Frequently Asked Questions

  1. How did MicroStrategy's revenue and profitability change in 2007?

    Total revenues rose to $350.7 million from $313.8 million, driven by growth in product support, services and other revenues to $250.3 million. Net income fell to $58.5 million from $70.9 million, and income from operations decreased to $88.2 million from $99.8 million, as operating expenses grew faster than gross profit.

  2. Why did product license revenue decline in 2007?

    The filing attributes the 6.6% decline to fewer and smaller product license transactions above $1.0 million in recognized revenue. The 2006 results included one unusually large transaction recognizing $4.3 million in revenue.

  3. What is the status of the Diagnostic Systems Corp. patent lawsuit?

    DSC filed a complaint on November 8, 2007 alleging infringement of U.S. Patent No. 5,537,590 by the MicroStrategy 8 platform. MicroStrategy denied infringement and counter-claimed for a declaratory judgment. The parties proposed a trial date of March 31, 2009, and the company states the outcome is not presently determinable, so no provision has been recorded.

  4. Who controls voting power at MicroStrategy?

    Class B common stock carries ten votes per share, and holders of class B stock owned 75.1% of total voting power as of February 1, 2008. Michael J. Saylor, Chairman, President and CEO, held 66.2% of total voting power, enabling him to determine the outcome of director elections and other stockholder votes.

  5. What are the company's liquidity and capital commitments?

    Cash, cash equivalents and investments were $85.2 million at year-end 2007, and management believes these plus operating cash flow will suffice for at least the next twelve months. The company agreed to buy a corporate aircraft for $46.0 million, with delivery expected in mid-2009, and total contractual obligations listed were $73.6 million.

04—Continue

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