MicroStrategy to launch new Web macrostrategy

One month after it cut its workforce by 10% and announced a major restructuring plan, business intelligence software vendor MicroStrategy Inc. next week will introduce a drastic change in its sales and distribution plan based on a new pricing scheme and an online store.

The centerpiece of the Vienna, Va.-based company's plan is a new Web store and e-commerce initiative that will allow the company to automate the bulk of its sales operations and give customers the option of what CEO Michael Saylor called "self service." The Web store will offer video product demonstrations, free software trials and all the pricing and product information that customers need to make purchasing decisions, Saylor said.

"Traditionally, the thinking was you had to be in front of the customer," said Saylor. "Our conclusion is that breakthroughs like streaming video have forced us to a point where if we cling to our traditional distribution model, we're not going to be able to afford to support our customer base."

Although details of the new pricing structure will not be released until Monday, Saylor said the company will offer a two-tiered pricing structure for enterprise users and standard-edition users. For large companies, MicroStrategy will offer a choice between per-user and per-CPU pricing.

Saylor also said he views the shift to online sales as a means to expand the company's customer base from its current level of 1,000 large companies to potentially 100,000 companies of all sizes. "With the development of the Web we've found that there are tons of companies, like Amazon.com, that now have databases and IT budgets that are approaching the size of [the industry's larger, traditional companies]," said Saylor. "There are now 100,000 or more corporations out there that need the type of technology we sell."

MicroStrategy recently watched its stock price drop from $333 per share in March to $27.50 by early this month. Although the company's business intelligence products remain strong players in the market, new federal revenue-reporting guidelines forced the firm earlier this year to restate its earnings from 1997 to last year (see story). The restatements lowered the company's revenue figures for the past three years, pushing its stock price into a nosedive. In June, however, the company announced it had received $125 million in new financing, which allayed concerns on Wall Street (see story).

Dan Vesset, a senior analyst at International Data Corp. in Framingham, Mass., said he views Saylor's new online strategy as a way to attain transparency. "They are obviously following what Oracle Corp. did when they put all of their pricing on the Net," said Vesset, who added that the move could open up a middle market for the company as well. "The idea to sell through the Web could translate into more sales and more sales at a lower price point."

Although head count at the company, particularly in its sales division, could increase over the long term as a result of the new strategy, Saylor said that the new e-commerce plan should allow the company to do more with less.

"We should be able to take a lot of the redundant cycles out of the selling process without increasing the head count," said Saylor. "We're trying to run the business very lean and mean right now. Our inventory is time and we want to squeeze time out of our supply chain."

Keith Gile, a senior industry analyst at Giga Information Group Inc. in Stamford, Conn., said the new online strategy "should lend some credibility" to MicroStrategy's pricing and sales process. "It's a maturity thing," said Gile, who added that the change is necessary if the company wants to extend its reach beyond the market it currently serves.

"They certainly need to show more transparency," Vesset said. "As far as technology goes, they are a very strong player."

As far as MicroStrategy's accounting problems earlier this year, Vesset said it's unlikely to spell major problems for the company. "In the long term it will be seen as a minor event," he said.

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