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SEC probes Microstrategy
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April 13, 2000: 8:36 p.m. ET
Software firm under investigation for earnings, revenue restatement
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NEW YORK (CNNfn) - The Securities and Exchange Commission is investigating the Vienna, Va.-based software company MicroStrategy Inc. following an earnings restatement that caused the company's stock to plunge last month.
MicroStrategy (MSTR: Research, Estimates) shares sank 140, or 62 percent, to 86-3/4 on March 20, after the company said that it would restate its operating results for the past two years to comply with new federal accounting guidelines on reporting revenue. MicroStrategy stock had traded as high as 333 earlier in March, up from a low of 7-11/32 a year ago.
In a filing made Thursday with the SEC, MicroStrategy said that the SEC had issued "a formal order of private investigation in connection with matters relating to our restatement of our financial results."
"The SEC has requested that we provide them with certain documents concerning the revision of our financial results and financial reporting documents," the company's SEC filing said.
MicroStrategy said that it is cooperating with the SEC, and that the outcome of the investigation "cannot yet be determined." At the same time, the company faces numerous shareholder lawsuits.
The company said in the filing that it revised its revenue and operating results to conform to an accounting standard on software revenue recognition. As a result of these changes, MicroStrategy will now recognize revenue for large, complex contracts that combine both products and services over a longer time period, thereby increasing the amount of deferred revenue on its balance sheet at the end of 1999 and 1998.
MicroStrategy makes software that enables business managers to analyze detailed, transaction-level databases, turning reams of data into intelligence that they can use to make decisions.
Last July, the company, led by the 35-year-old Michael Saylor, moved beyond data mining software by launching a new business unit called Strategy.com. The aim of Strategy.com is to deliver highly personalized, timely information to people through e-mail, telephone and wireless devices. As an example, people could be alerted about traffic jams, stock price moves, or changes in weather patterns.
When the company's stock plunged, Saylor lost $6 billion on paper, since he owned 43.5 million MicroStrategy shares, representing about 56 percent of the total shares outstanding. 
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Microstrategy Inc.
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