01—Abstract
Summary
Summary of the 10-K filed February 24, 2009. Cited figures are marked; the original filing is the authoritative source.
MicroStrategy Incorporated's annual report on Form 10-K for fiscal 2008 shows total revenues of $360.4 milliona in 2008, up from $335.4 million in 2007, with net income of $41.8 million, or $3.40 per diluted share, compared with $58.5 million in 2007.
Growth came from product support and other services, which rose to $264.5 millionb from $235.0 million, while product license revenues declined 4.4% to $95.9 million. Operating income from continuing operations fell to $67.8 million from $89.7 million, driven by higher sales and marketing and general and administrative expenses. International revenues were 40.4% of total revenues in 2008.
The company is positioned around its MicroStrategy 8 business intelligence platform and expects to make MicroStrategy 9 generally available in the first quarter of 2009. Cash and cash equivalents rose to $122.9 millionc at December 31, 2008, and net cash from operating activities was $88.9 million. Management stated that existing cash and expected operating cash flow will be sufficient for working capital and capital expenditures for at least the next twelve months, and it does not currently expect to borrow.
Investor risk factors include concentrated voting control, with Michael J. Saylor and holders of class B common stock controlling 75.2% of total voting power, and an unresolved patent infringement suit by Diagnostic Systems Corp. whose outcome the filing describes as not presently determinable. The company also completed the sale of its Alarm.com equity interest on February 13, 2009 for approximately $27.7 milliond in cash, with an expected after-tax gain of $14 million to $17 million in the first quarter of 2009.
02—Key points
Key Highlights
- Total revenues rose to $360.4 million in 2008 from $335.4 million in 2007, while net income declined to $41.8 million from $58.5 million.
- Product support and other services revenue grew to $264.5 million from $235.0 million, while product license revenue fell 4.4% to $95.9 million.
- Operating income from continuing operations declined to $67.8 million from $89.7 million, reflecting higher sales and marketing expense of $137.7 million and general and administrative expense of $60.9 million.
- Diluted earnings per share were $3.40 in 2008 versus $4.55 in 2007.
- Cash and cash equivalents increased to $122.9 million at December 31, 2008, with operating cash flow of $88.9 million.
- The February 13, 2009 sale of the Alarm.com equity interest brought approximately $27.7 million in cash, with an expected after-tax gain of $14 million to $17 million in the first quarter of 2009.
- Class B shareholders, controlled by Michael J. Saylor, hold 75.2% of total voting power, and a patent infringement suit by Diagnostic Systems Corp. remains pending with an outcome the filing states is not presently determinable.
03—Questions
Frequently Asked Questions
How did MicroStrategy's revenue and profitability change in 2008?
Total revenues increased to $360.4 million from $335.4 million in 2007. Net income fell to $41.8 million from $58.5 million, and diluted earnings per share fell to $3.40 from $4.55. Growth in product support and other services offset a decline in product license revenue, and higher operating expenses reduced operating income.
Is the company generating enough cash to fund its operations?
Cash and cash equivalents rose to $122.9 million at December 31, 2008, and net cash provided by operating activities was $88.9 million. Management believes existing cash and operating cash flow will be sufficient to meet working capital and capital expenditure needs for at least the next twelve months, and it does not currently expect to borrow money to finance operations.
What are the main legal and control risks for shareholders?
Diagnostic Systems Corp. has sued the company for patent infringement, seeking damages, and the filing states the outcome is not presently determinable, with no provision recorded. Separately, holders of class B common stock, led by Chairman and CEO Michael J. Saylor, control 75.2% of total voting power, which limits the influence of class A shareholders over corporate matters.
What is the company's outlook for its product line?
The company expects to make MicroStrategy 9 generally available in the first quarter of 2009, with enhancements in scalability, performance and departmental deployment. Research and development expenses are expected to rise significantly in 2009 after the company stops capitalizing software development costs for MicroStrategy 9.
04—Continue