Wednesday June 21, 2000 11:00 a.m. EDT
MicroStrategy President and CEO Michael Saylor has watched his company's stock roller coaster from a high of $333 to a low of around $12 after a March announcement that the company's profits and revenue were overstated for two years. The company, which was founded in 1989, has said that it revised its financial results mainly to comply with 1997-published accounting standards.
This week, the company received a $125 million investment and Saylor apologized to shareholders. Saylor himself has seen his paper-value personal stake in MicroStrategy drop around $11 billion and the company has recently started granting new stock options to employees at the current lower valuations.
Saylor co-founded MicroStrategy Inc. in 1989. In 1987, he graduated with highest honors from MIT with dual Bachelor's degrees in Aeronautics and Astronautics, and Science, Technology, and
Society. Eighteen months after graduation, he established MicroStrategy, whose software helps companies use technology and personal preferences to build one-to-one relationships with their customers. He was named KPMG High Tech Entrepreneur of the Year in 1996 and the Ernst & Young Software Entrepreneur of the Year in 1997. The Red Herring Magazine recognized him as one of the Top 10 Entrepreneurs of 1998. Washingtonpost.com has a business relationship with MicroStrategy for a new product.
NOTE: Michael Saylor could not answer any questions pertaining to pending litigation involving MicroStrategy.
Take a look at the latest from the Washington Post on MicroStrategy.
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Has retaining employees been an issue in the face of the reduction in the value of stock options? What has MicroStrategy done to combat that issue?
Michael Saylor: We have not had any defections among our top 50 executives (they are extremely committed to the mission of the company). Their support has been a great reassurance to the rest of our firm, and by and large, I don't think we have lost more than a handful of people out of 2250 during the past 3 months because of our financial challenges.
We have issued additional stock options to our employees at recent prices. This is also well received.
How does your company match up with its competitors (BOBJ & COGN)? All have more revenues and earnings than MSTR. Why should investors pay your company a second look?
Michael Saylor: Our software is the most scalable (we have clients with 44 terabyte databases). Our competitors have nothing to match our offering on the high end.
We are the only firm with integrated web, wireless, and voice interfaces.
We offer personal news, finance, weather, etc programming through strategy.com. It would cost $10+ million or more for many companies to implement these services themselves, and our competitors do not offer anything comparable.
We have a vision for how our clients can harness their databases to better market, sell, and serve their customers. We call this narrowcasting and it has proven to be very popular.
I think that our customers come to us because they see that we are most interested in making their company 10X more successful, rather than just selling some software...
Mr. Saylor, you founded MicroStrategy in 1989. Obviously the Internet existed then but it wasn't really as abundant as it is now. Did your vision for MicroStrategy involve the use of the web from the get-go or did it just adapt to the prevelance of the web?
Michael Saylor: Back in the early 90's, we used to say we wanted "A crystal ball on every desktop". We didn't realize that the web would make this possible a few years later, but we believed that we would eventually find a way.
Technology is like magic. A flatpanel display combined with TCP/IP, a database, query engine, and speech recognition is the solution to "Mirror, mirror, on the wall, who is the fairest of them all?"
That's why I love this business.
What has happened to your vision of an internet university? I believe it is an important initiative and it doesn't require $100 million to get started. We at the Rockefeller Foundation would like to become involved. How can we do this?
Michael Saylor: The internet university is alive and well. My goal is to initially roll out a cyber-libary of digital video that can be used by any for-profit or non-profit organization in order to accelerate the free education initiative. Eventually, people may just go direct to the web site.
I think the entire thing will unfold over about 10 years.
Send me an email if you would like to get involved. (firstname.lastname@example.org)
San Francisco, VA:
How was the recent stockholder's meeting? How do you explain the recent fluctuations in MSTR's stock price? The pump in the price last week and now a decline?
Michael Saylor: I thought the shareholder meeting was great. We have wonderful, committed, passionate shareholders. They were all, without exception, supportive of the company. They asked good questions, gave some good advice, and I think everyone enjoyed the proceedings.
I can't comment on the stock price.
Falls Church, VA:
I run a small software company in Northern Virginia. I feel that it is extremely important for us to make a profit and have a strong profit incentive in our company. How does Microstrategy instill and maintain this focus when the company is not predicted to earn a profit in the near future?
Michael Saylor: We have always had tight fiscal discipline at MicroStrategy. We grew the business from nothing to 600 people without any financing whatsoever.
Since the majority of the firm is still owned by the employees, we treat all cash spent as though it was our own, and work hard to get the best bang for the buck.
We have been working on systems to provide direct feedback to each business unit/district within the firm on their operational performance in order to instill a strong performance based culture.
What are the key drivers in business and society that will drive the need for your products?
Michael Saylor: The explosion in data capture (1000X), the explosion in communications (500 million cell phones), the explosion in ecommerce transactions via XML standards...these are all driving our business very hard.
We see a world where 1 billion people depend upon intelligence flowing from databases every minute of the day.
Where do acquisitions and spin-offs fit into your strategy, and under what circumstances would you consider an offer to buy MSTR?
Michael Saylor: We intend to build a great institution at MicroStrategy. The company was not built with any intention of sale. We are much more likely to acquire firms than be purchased.
Our goal is "Intelligence Everywhere", and I believe that to achieve this goal, we need to protect the culture that we have created, and avoid breaking faith with our employees, who have made many sacrifices in order to achieve this vision.
San Francisco, Ca:
Why would a talented engineer want to work for MicroStrategy over a well funded startup?
Michael Saylor: "A subordinate whose time horizon is longer than that of his superior is doomed" - Bruce Henderson (founder of BCG)
We intend to build a company that will last for hundreds of years, change the world, and do for intelligence what GE did for electricity.
If you want a great place to do great work, and you never wan to have to look over your shoulder, wondering if your corporation is going to be sold, change direction, get distracted, etc, then we are the right place for you.
Reston, Virginia :
Please outline the three major areas that Microstrategy software can contribute in the development of B2B exchanges.
Michael Saylor: Our software can enable real-time intelligence to flow from the B to B exchange out to all the trading partners via the web. We have the ability to analyze the database, perform statistical, finance, and relational functions, while ensuring security is maintained.
Our software can proactively notify business users of opportunities, bids, other competitive intelligence via web, wireless, and voice.
Our strategy.com network is building up a substantial user base (right now about 385,000 people each day)...during the coming few years, we should have millions on this network, and it could be a good trading partner or distribution channel for a B to B network.
Could you ever pass the reigns of MicroStrategy over to someone who may manage with less passion but more objectivity?
The happiest stories in the Business School case studies contain a page where the entrepreneur turns control of the business operations over to someone else. The business people make the business decisions without the distraction of emotion. The entrepreneur may continue to pursue "The Vision" without the distraction of accounting. In contrast, the saddest cases end with the entrepreneur being thrown out.
Can you forsee a time when you could ever let go of any part of your baby?
Michael Saylor: We now have 2250 employees, and 50 senior executives, and I am not involved in any of the daily, weekly, or monthly operations of the firm.
My primary responsibility is to protect the culture, set the vision, allocate capital, and motivate great work.
We have been hiring new senior executives as they come available. You can expect that we will bring in more over time. No company growing rapidly ever has enough good executive talent to meet its needs, so it would be irresponsible if we were not always looking for more help in this area.
As long as the board is supportive of my performance as CEO, I would keep that role.
I've heard that MSTR ceased hiring new employees. When does this end?
Michael Saylor: We will add nearly 1000 people this year, at our current rate. We are definitely still in growth mode.
What do you think the advantages are to operating a software company in the DC area versus the Silicon Valley area? Do you plan to expand MSTR operations in Silicon Valley?
Michael Saylor: I like DC better than the Valley. I think that S.F. costs are too high, there is too much competition for employees, and the work attitude their is much more mercanary.
Besides, we just all like DC and the culture here.
There is a look of talk in government and in the media about the need for greater privacy protections. Do you see possible legislative action controlling data sharing as a threat to what your company does?
Michael Saylor: I think privacy legislation will help us. We are completely permission based, so we would rather have the consumer's permission be a requirement.
I think some enlightened government involvement in this industry will accelerate its growth, not slow it down. Think "traffic lights and speed limits" in the auto industry.
Will the web ever move to a truly user centric portal where a user can pick choose exactly the information he wants on his website (from any web based source) and not have the portal provider dictate content (this is a big problem with current portals). Is strategy.com designed to do that?
Michael Saylor: Yes, strategy.com is meant to allow the user to fine-tune exactly what they want to know, then proactively deliver it to them via web, wireless, and voice.
check us out at www.strategy.com
we also have a really nice WAP site that you can access from any WAP enabled phone.
What steps has the company taken or will it take to reestablish credibility with Wall Street?
Michael Saylor: We have been working hard on building the business. We are about to launch our MicroStrategy 7 product line. We expect it to be a big boost for us in the Business Intelligence Market
-1000 man years of engineering
-4 million lines of code
-4 years in the making
We think it is the most powerful software in the market for intelligence application, and we should be able to put all of our competitors on the defensive with it.
Sarah Carr, Washington D.C.:
What are your thoughts on the way the media has covered you as an individual throughout the past couple of months? Do you think you have been treated fairly?
Michael Saylor: They have their job to do, I have mine.
I am just happy that people are aware of our existence. That caused them to ask "what do they do". Once people understand what we do, they generally become quite supportive.
We are trying to eliminate traffic jams, save lives, cut costs, eliminate waste, and improve quality of living, all with better intelligence. We can't do it alone, so we must ultimately appeal to the rest of the world to help us.
Do you really believe people will eventually have microchips implanted in their ears so they can get up-to-the-minute information about subjects of interest to them?
I read a quote from you to that effect.
Michael Saylor: I was misquoted.
I said that people would have a earpiece (speaker) in their ear. Everyone in Europe already has them. Not much of a prediction.
It is much more efficient to take in some information via audio channel than by reading, and an earpiece frees up your hands.
Our time's up. Thanks so much to Michael Saylor and to everyone who joined in.
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