Quirky MicroStrategy Springs Another Surprise

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By Jerry Knight
Monday, August 22, 2005

MicroStrategy Inc. has produced such solid profits and strong stock performance recently that it was almost possible to believe the company had put its past behind it and matured into what it was always meant to be -- a nice second-tier software maker.

Almost.

Then MicroStrategy did one of those things that leave Washington investors scratching their heads:

According to a filing last week with the Securities and Exchange Commission, the company gave founder, chairman and chief executive Michael J. Saylor a $25,000 raise to $400,000 a year and then wrote Saylor a check for $800,000 as a midyear bonus .

Since when is success determined by the halftime score?

It's not uncommon for salespeople to be compensated based on their performance over periods of less than a year, but only a handful of companies report awarding midyear bonuses to top executives, according to Factiva, the online data service of Dow Jones & Co.

"Bonuses based on less than a full year's performance are an utter joke," said Graef S. Crystal, an executive compensation guru. "They allow an executive to cash in on the good parts of the year, but he is never forced to take a negative bonus for the bad parts of the year."

MicroStrategy
MicroStrategy officials declined to comment on the record, except to point out that the bonus was granted by the company's compensation committee, composed entirely of outside directors.

Saylor's surprise bonus is the latest evidence that while MicroStrategy has put its conspicuous problems behind it, it will never be a plain-vanilla investment. And Saylor, who in his younger days was given to grand pronouncements that his company's software would be "ubiquitous" and create an information revolution, will never be just another CEO.

Washington's hottest high-tech company before the tech bubble burst, MicroStrategy's stock was decimated on March 20, 2000, when the company restated financial results. The company was later cited by the Securities and Exchange Commission for accounting irregularities. Saylor and two other executives settled the case by paying $350,000 each in penalties, neither confirming nor denying wrongdoing. The trio paid $10 million to settle civil lawsuits over the accounting issue.

The company survived both the tech stock collapse and the SEC investigation by lowering its profile and concentrating on its business of selling data-mining software that makes it possible to find crucial needles in haystacks of information.

The company is regarded as a leader in its market niche but still is controversial enough that analysts who recommend the stock salt their reports with caveats.


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© 2005 The Washington Post Company

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