MicroStrategy Shares Dip As Analysts Air Concerns
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Tuesday, February 5, 2008
Shares of MicroStrategy slid yesterday after the McLean business software firm reported a decrease in profit and analysts aired concerns about the company.
The stock opened at near its 52-week-low before rebounding somewhat and closing at $68.53, down $3.89 (5.37 percent).
The stock is down 44 percent over the past year. It is far off highs reached during the dot-com boom.
At least two analysts reduced earnings estimates yesterday and criticized the company's management as being out of touch with investors. MicroStrategy sells software that helps companies sort through marketing and sales data.
In a report issued late Friday, MicroStrategy said it earned $17.7 million ($1.41 per share) in the fourth quarter vs. $22.4 million ($1.68) a year ago, a decline of 21 percent. A survey of analysts by Thomson Financial had estimated the company would earn $1.72 per share. The company said the lower profit was because of increased recruiting expenses and investment in the expansion of overseas business.
One analyst noted that even with declining earnings the company still plans to buy a Bombardier Global Express XRS jet for $46 million, including a cabin with "24k polished gold, satin antique brass or equivalent" plated fixtures, according to a contract filed with the Securities and Exchange Commission.
"There is no other software company with their level of revenues and their market capitalization that has a corporate jet as an asset," said the analyst, Michael B. Nemeroff, of Wedbush Morgan Securities. "I hope they bought it with anticipation that it's going to increase their business or help them improve their operations. But I don't think it will. I think it was just a very good example of corporate excess."
Cowen and Co. analyst Peter Goldmacher wrote in a note that the company has declined to make available executives to talk to Wall Street about operations. Many companies offer such guidance.
"We would continue to avoid the stock given the significant deterioration in fundamentals over the course of 2007 and management's refusal to communicate with the Street to set expectations, making the stock a rudderless ship," Goldmacher said.
"While 2008 could be a better year, we'd prefer to own almost any other stock in software," he added.
A company spokesman declined to comment.
