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MicroStrategy Beats the Street, But Stock Falls

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Posted August 3, 2010 By Paul Shread     Feedback

The business intelligence software maker reported strong earnings and sales growth in the second quarter, but rising expenses worry one analyst.

MicroStrategy (NASDAQ: MSTR) posted better than expected quarterly results last night, but shares of the business intelligence software maker traded lower on Wall Street today on concern about rising expenses.

For the second quarter, MicroStrategy reported a 23 percent jump in sales to $107.5 million, up from $87.8 million in the year-ago quarter. That was $7 million better than the Thomson Reuters forecast, while earnings per share of 97 cents were 11 cents ahead of estimates.

Product license revenues grew a healthy 41 percent to $28.9 million, while product support and services revenues rose 16 percent to $74.5 million.

Operating expenses were up 24 percent to $68.8 million. The company also capitalized $2.2 million in research and development costs associated with the development of its MicroStrategy Mobile software, which Roth Capital analyst Nathan Schneiderman said added 13 cents a share to earnings in the quarter. A lower tax rate also boosted results, while rising sales and marketing expenses offset those gains.

Because of those rising expenses, Schneiderman cut earnings estimates on MicroStrategy, sending the company's shares 6 percent lower today to just under $80 a share. FBR Capital also lowered earnings estimates on the company, but raised sales estimates.

MicroStrategy eschews the common Wall Street practice of holding a conference call with analysts following its earnings release. Instead, the company simply highlighted its product and customer achievements in the quarter in a press release.

The company trumpeted last month's release of MicroStrategy Mobile for Apple's iPhone and iPad and greater performance for its business intelligence software customers.

MicroStrategy President and CEO Michael Saylor said in a statement, "The mobile Internet is the next wave of information technology. We see a revolution afoot in business intelligence as organizations can now empower their executives, workforce, suppliers and partners with immediate access to business information from mobile devices. We believe that mobile business intelligence has the potential to expand the BI market dramatically and that MicroStrategy Mobile is on the leading edge of this new market."

The company also highlighted its in-memory technology and other performance-boosting features of MicroStrategy 9 Release 2, including improved data compression and faster data loading and analysis.

FBR said the strong license revenue "supports our checks that the MicroStrategy 9 product cycle still has legs a year after availability."

Gartner ranks MicroStrategy sixth in the business intelligence market, with a 3 percent share and about $300 million in sales last year.

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