Lower your revenue growth expectations for MicroStrategy (Nasdaq: MSTR) as the company focuses on profits.
"It is not clear to me that we have to growth revenue at 40 to 50 percent to be successful," MicroStrategy CEO Michael Saylor said Tuesday, during a conference call with analysts. "It is clear to me that we have to be profitable."
MicroStrategy on Tuesday reported a narrower-than-expected loss for the fourth quarter, but fell short of consensus revenue estimates. The company also reduced goals for revenue growth in the first quarter and 2001. The vendor of data analysis software and services now sees 2001 sales rising 30 percent, lower than analysts' previous expectations of 40 to 50 percent growth.
Shares of MicroStrategy traded at $16 in after-hours activity on the Island ECN, following the release of fourth-quarter results. MicroStrategy rose 81 cents to $16.94 in Tuesday's regular trading ahead of the quarterly report.
The company reported a fourth-quarter loss of $24.9 million, or 31 cents per share, excluding special charges. Analysts surveyed by earnings tracking firm First Call produced a consensus forecast calling for a loss of 40 cents per share.
Fourth-quarter revenue increased 26 percent year-over-year to $58.12 million. First Call consensus predicted revenue of $59.65 million for MicroStrategy's quarter ended Dec. 31.
MicroStrategy expects its core business will increase 2001 revenue 24 to 28 percent, and breakeven in the fourth quarter of this year. That sales target is below MicroStrategy's own estimates of 30 percent industry growth.
"The prudent guidance for us is to give guidance that we can exceed," Saylor told analysts. "Our objectives are to get profitable, get share, get big. In that order. ... It is critical that we be profitable now."
Core revenue for MicroStrategy should rise 7 to 12 percent year-over-year in the first quarter, the company said.
Strategy.com, the company's Internet unit, projects roughly 100 percent revenue growth in 2001, including 20 to 40 percent year-over-year growth in the first quarter.
First Call consensus was calling for overall first quarter revenue growth of 22.5 percent year-over-year.
A focus on profitability combined with the U.S. economic slowdown requires a careful revenue forecast, Saylor said. Some analysts found that that rationale hard to swallow.
Other analytical software vendors, such as Business Objects (Nasdaq: BOBJ) and Informatica (Nasdaq:INFA), expect revenue growth of 50 to 150 percent, said Robert Tholemeier, analyst with Wells Fargo Van Kasper.
"MicroStrategy is trying to play the conservative guidance game, but there isn't any slowdown in IT spending for analytical software, it's a bogus concern," he said. "I think the growth for this space is higher, and I think the bar for these guys should be set higher."
Although MicroStrategy's public forecast for revenue growth is lower than its projection for the overall market, company executives said they're not worried about losing market share. MicroStrategy sees no direct competitors appearing in the next one to two years, Saylor said.
That lack of competition is exactly why MicroStrategy's prediction of slower-than-market growth is so baffling, Tholemeier said.
"I think it's ok to sandbag your guidance, but it's nerve-wracking to guide below the market," he said. "MicroStrategy has a great platform, (CFO) Eric Brown is committed to making the company operationally excellent, but I don't know what to think about these numbers. It's a very muddled situation.">