MicroStrategy Lays Off 234, Restructures

Financial efforts include management shuffle and new partners, investors

Business management software vendor MicroStrategy Inc. will lay off workers for the first time since its creation in 1989 as part of a restructuring plan that aims to turn around the company's financial future.

The Vienna, Va.-based company, which has watched its stock price drop from $333 per share March 10 to $27.50 recently, announced the restructuring plans last week.

"Our year-to-date financial performance has been unacceptable, and we are firmly committed to strengthening our business," said CEO and President Michael J. Saylor. "Reducing head count was a very difficult decision for us to make. However, this reduction was a necessary step in our plan to improve operating results," he explained.

The layoffs of 234 people - 10% of the company's workforce - will be completed later this month.

While the markets for MicroStrategy's data mining and customer relationship management software remain healthy, the firm was hard-hit economically earlier this year when it had to restate its earnings from 1997 to 1999 to accommodate new federal revenue-reporting guidelines, said company spokeswoman Ivy Eckerman. The restatements lowered the company's revenue figures for the past three years, sending it into a tailspin on Wall Street.

"With the restatement, there was some hesitancy to close deals" among some customers, said Eckerman. "MicroStrategy is trying to aggressively get back on track. We have tremendous technologies, and we're trying to address any concerns people have with our business."

The company did get some good news in June, when it received $125 million in new financing from an investors' group. Since then, it has signed up new partners and launched an online store where customers can evaluate and purchase the company's electronic-business software applications. The company is also expanding its target audience to woo small and midsize businesses, which it hasn't tapped in the past.

Early last month, MicroStrategy juggled its management team, naming Eric Brown, former chief financial officer of subsidiary Strategy.com, as the new MicroStrategy chief financial officer.

Analysts say the restructuring is good for the company.

"Wall Street will respond favorably to the move, to see that executives know where to go to trim the fat," said Bob Moran, an analyst at Aberdeen Group Inc. in Boston.

"I have not heard one rumbling from [MicroStrategy] clients - those who have bought their systems - losing confidence in the company," Moran added.

Fighting the Good Fight

"Make no mistake, they have a fight in front of them" to return to a healthy financial state and to continue as one of the market leaders, Moran said. "But they didn't get to where they were without stellar technology and marketing."

Dan Vesset, an analyst at International Data Corp. in Framingham, Mass., said that if MicroStrategy follows through with the staff reductions in administration and doesn't touch the research and development staff, the restructuring won't hurt the continued development of its products.

"They are strong enough to get through" the tough financial times, Vesset said, "as long as they keep their technology strong."

Copyright © 2000 IDG Communications, Inc.

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