Microstrategy Inc (MSTR) 2004 Q4 法說會逐字稿

Good afternoon, my name is Tanya and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the MicroStrategy 2004 fourth quarter earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period. [OPERATOR INSTRUCTIONS].

Mr. Saylor, you may begin your conference.

Hello, this is Michael Saylor, I'm the Chairman and CEO of MicroStrategy.

I wanted to welcome everybody to our conference call to discuss our results for the fourth quarter of 2004.

I'm here with Sanju Bansal, our Vice Chairman, as well as Arthur Locke, our Chief Financial Officer, and Jonathan Klein, our Vice President and General Counsel.

At this point, we're going to have Arthur Locke read the Safe Harbor statement and then provide you with a financial review for the quarter.

Sanju Bansal is going to provide a review of our product and customer activities for the quarter and a few highlights for the year.

I will end with a corporate summary and then we will go on to a question-and-answer session.

And with that I'll pass the floor to Arthur Locke.

Thank you, Michael.

Various remarks that we may make about our future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the private Securities Litigation Form Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our registration statements and periodic reports filed with the SEC.

I would also like to note that we will post supplemental information regarding our financial results through the IR section of our website, which is www.microstrategy.com.

This supplemental information will provide a detailed reconciliation of GAAP to pro forma results.

Revenue in the fourth quarter was 71.6 million, which exceeded the upper end of our revenue guidance range of 70 -- of 47.7 to 57.4 million and was above the consensus estimate of 60 million.

Total revenue increased 20 million or 39 percent versus Q4 2003, and increased 11 million or 18 percent sequentially from Q3 2004.

Q4 license revenue was 34.1 million, an increase of 10.7 million or 46 percent as compared to Q4 2003.

This marks the Company's highest quarterly license revenue attainment in its history.

Q4 services revenue was 37.5 million, an increase of 9.2 million or 33 percent as compared to 28.3 million in Q4 2003.

Total license revenue transactions during Q4 exceeded 500, as compared to approximately 380 in Q3 2004.

Also during Q4, the Company completed 29 transactions in excess of 500,000 and 12 in excess of 1 million.

The Q4 2004 revenue mix was 48 percent licenses and 52 percent services.

The revenue mix for the business in Q4 2004 was 57 percent for North America and 43 percent international.

Total revenue for the full-year 2004 was 231.2 million, an increase of 55.6 million or 32 percent, over the full-year 2003.

Full-year 2004 revenue was comprised of 97 million in license revenue and 134.2 million in service revenue, as compared to 77.2 million in license revenue and 98.4 million in services revenue for 2003.

Gross profit margins continue to remain high at 88 percent for Q4 2004, as compared to 86 percent in Q3 2004 and Q4 of last year.

Gross profit margin and license business was 97 percent, remaining consistent with our Q3 license margin of 96 percent.

Gross margin in the services business was 80 percent, also remaining consistent with our Q3 services margin of 79 percent.

Operating income margin for the quarter was 27.2 million or 38 percent, representing an increase of 14.7 million or 24 percent in Q4, 2003.

For the full-year, the Company posted an operating income margin of 68.5 million or 30 percent, an increase of 40.5 million from 28 million or 16 percent in 2003.

Our total head count at the end of Q4 2004 was 945.

The GAAP line item operating cost for Q4 2004, as compared to Q3 2004, are as follows -- Cost of sales remained consistent between Q4 and Q3 of 8.5 million.

Sales and marketing in Q4 was 20.8 million, as compared to 17.2 million in Q3.

This was primarily a result of an increase in variable field compensation from our improved financial results.

R&D for Q4 was 4.3 million and 7.3 million in Q3.

This decline was due to the capitalization of software development costs or approximately 2.8 million in Q4.

G&A came in, in Q4 at 2.8 million -- excuse me, 10.8 million and in Q3 was 8.7 million.

This increase was primarily due to bonuses and stocks 404-related fees.

In Q4 2004, we earned GAAP net income of 24.5 million or $1.43 per share fully-diluted with 17.2 million diluted shares outstanding.

Our Q4 2004 pro forma or adjusted net income for Q4 was 26 million or $1.51 per share exceeding First Call of consensus of 84 cents per share.

The primary differences between our GAAP net income and our adjusted net earnings is a 1.5 million non-cash net tax expense related to the use of our U.S.

NOL and other deferred tax assets.

This presentation is consistent with prior quarters in providing a near-cash tax expense amount.

We have provided GAAP results and additional financial information in the Press Release to reconcile the adjusted net earnings as described above.

The Q4 2004 provision for income taxes was 2.6 million, as compared to an income tax benefit of 3.7 million in Q4 2003.

Our full-year 2004 income tax benefit was 99 million, as compared to a benefit of 2.6 for 2003.

The full-year 2004 tax benefit of 99 million included a net non-cash benefit of 102.1 million related to the release of the Company's U.S. and Canadian deferred tax asset valuation allowance and the utilization of non-cash U.S. deferred tax and assets.

Turning to the balance sheet, I would like to note that our cash plus short- and long-term investment balance increased by 31.3 million to 132.5 million at the end of Q3 2004 -- excuse me, at the end of Q4 2004.

The cash plus investment balances has increased 80.6 million from 51.9 million in 2003 to 132.5 million in 2004.

Over the past 2 years, the Company has generated 117.4 million in net cash flow, increasing its cash and investment balances from 15.1 million at the end of 2002 to 132.5 million in Q4 2004.

Total deferred revenue increased by 3.7 million from Q3 2004, to 45.4 million at the end of 2004.

This amount also represents an increase of 14.2 million or 46 percent from the end of 2003.

Our Q4 DSO figure was 42 days, as compared with 46 days in Q3 2004, and 55 days at the end of 2003 -- excuse me, our Q4 DSO was 52 days.

Just a comment on guidance and other metrics.

As of January 1, 2005, the Company determined that it will no longer provide revenue or EPS guidance.

The Company believes that it's in the best interest of shareholders to avoid in engaging in predictions of short-term financial performance, which are inherently uncertain.

We believe that this will allow the Management Team to more effectively run operations and build long-term shareholder value.

This concludes my remarks and I will now turn over the call to Sanju.

Great, thank you very much, Art.

And it's great to have you on the call today.

What I thought I would do is provide for those of you that are maybe less familiar with MicroStrategy, just an update on some representative transactions for the quarter and the kinds of applications that customers are building and deploying using MicroStrategy, and then also give you an update on the product portfolio which we've taken to market this last year and some exciting new activity that we have with MicroStrategy 8 that we'll be releasing next week.

So, first in terms of some customers that we've done business with within the quarter, the first one I'd like to discuss is Oakwood Homes.

Oakwood Homes has phased out its Crystal Reports reporting environment and recently expanded its MicroStrategy deployment.

Several hundred Oakwood Homes' employees across Finance, HR and Sales received MicroStrategy-based operational reports daily.

A MicroStrategy powered extranet environment let's trade partners, lenders and realtors prepare homebuyers for the purchasing and closing of their new home.

These reports enable the lender to gather proper documentation to ensure a more efficient home closing process.

Second we have Oncology Therapeutics Network, also known as OTN.

OTN is a leading distributor of chemotherapeutic drugs for the treatment of cancer.

OTN selected MicroStrategy for its ease-of-use, advanced analytical capabilities, and scalability for large databases and thousands of users.

Initially, approximately 120 employees at OTN will use MicroStrategy to report, analyze, and monitor sales and marketing information against an Oracle data warehouse.

Third, we have Winn-Dixie.

Winn-Dixie has headquarters in Jacksonville, Florida and is one of the nation's largest food retailers.

After an in-depth valuation of many competing products in the industry, Winn-Dixie selected the MicroStrategy platform for its ease-of-use, scalability, and superior web-based platform.

Approximately 50 merchandising analysts, pricing analysts, and category managers will initially perform sales and customer reporting analyses against the 3.4-terabyte Teradata data warehouse.

The Company will utilize MicroStrategy to more effectively monitor pricing and sales in order to improve revenue and profitability.

I'd also like to provide, as I stated an update on some of our products and how they're perceived and how they're performing in the market.

The first of those, and perhaps the most significant is MicroStrategy Report Services.

We had a good year in 2004, essentially selling Report Services into the market.

If you have been following the Company, you know that we released that product in November of 2003.

Report Services allows business users to retrieve information from corporate databases for display in boardroom quality documents over the web or in e-mail.

Since its release in November of 2003, hundreds of customers worldwide have adopted Report Services.

So, I want to give you a sense of just a couple of customers and how they've commented on the product.

The first is Campbell Soup Company. "Campbell Soup is utilizing MicroStrategy Report Services for sales, finance, customer service and marketing applications," said Paul Williams, their Director of IT. "Report Services provides many options for presenting highly formatted information in a consistent and user-friendly format."

Second, we have RH Donnelly and a quote from Jill Mertens, who is their Director of Programming Services. "As a direct result of customer demand, RH Donnelly became an early adopter of MicroStrategy's Report Services solution.

With MicroStrategy Report Services, RH Donnelly's Senior Executives will leverage pixel-perfect sales and marketing reports to provide daily feedback on sales and product performance."

So, we've had good adoption this past year.

I would say that Report Services has been one of our most highly -- I guess adopted products.

It's been out in the market for only 14 months and we've had, again, good uptick from customers.

Also in April 2004 we introduced another product designed to deliver BI to a larger population of users and that product was MicroStrategy Office.

That product allows users who use Microsoft Word, PowerPoint, Excel, and Outlook to rapidly call up information stored in corporate databases without starting another program, so they can go directly from their Microsoft Office environment back to their corporate data.

This corporate information is immediately pasted into word documents, presentations, spreadsheets, and e-mail.

Using both MicroStrategy Report Services and MicroStrategy Office, nontechnical business employees can easily access corporate information to make better-informed business decisions.

In June 2004, we launched MicroStrategy Universal Edition.

This Universal Edition provides the capacity and high performance needed for thousands of additional business users, ranging from line-workers to top executives, to benefit from Business Intelligence.

As many of you may know, Universal Edition is a 64-bit version of our platform.

We take advantage of a lot of the benefits that are inherent in 64-bit hardware, so, the wider addressing structure allows us to access more memory, which is great for caching, which means that more users can get great high performance to their queries.

Universal Edition runs on IBM AIX and Sun Solaris.

And we are seeing that it's popular with new customers and we're also seeing that existing customers are upgrading to the 64-bit version.

In September of 2004, MicroStrategy 8, which has been in development for over 2 years, went into beta testing.

With an innovative easy-to-use set of capabilities and more than 2,000 enhancements cross the entire platform, MicroStrategy 8 enables thousands of users to make faster, better-informed decisions.

I think there are 3 principal themes that we're going to be conveying next week as we launch this product.

First, for the first time it integrates 3 distinct disciplines that people think of as Business Intelligence Reporting, analysis, and business monitoring, into one consistent platform.

The benefit there is that users can easily surf from a report into a more detailed analysis and then even across to alerts or scorecards and dashboards, which are quite popular, and be fully assured that, one, they don't have to leave their environment, and number two, that the data that they see is defined the same way because it's coming from the exact same Metadata This is in start contrast to offerings from our competitors, which actually use different Metadata and actually require users to go in-between distinct products in order to span the range of capabilities.

Number two, the product is definitely designed to drive BI to more business users than ever before.

We've revamped the user interface from top to bottom in, providing many one-click options and actions throughout the user interface, really speeding up the productivity.

Also, we'ved added more report formatting capabilities for delivery directly to the end-user so that they, in fact, can tune the report once it's been developed, pressed by a full-time programming report developer.

So, again, this allows people to change the format to suit their needs and then maybe republish that format out to their companions in the enterprise.

Third, MicroStrategy 8 will broaden access to data sources that are available through MicroStrategy or visible through MicroStrategy.

So in addition to providing data marts and data warehouse access, it provides access to operational systems and also provides access to sources like SAPBW.

So we will be adding additional data source support with MicroStrategy 8, ensuring that people can get to all the data in their enterprise.

So, we will have more details next week at the launch.

We're going to be launching the product at MicroStrategy World and so the official Press Release will come out on Monday with a full litany of all the features in MicroStrategy 8.

We will be doing a live launch at MicroStrategy World on Tuesday, I encourage all of you to attend if you can.

I know that many of you will be there.

And then also the following week we will have a Webcast launch that you can participate in.

And then after that we will be participating in about a 60 to 70-city Road-Show Tour in the month of February and so hopefully we will be in a city near you.

I encourage you to go to our website and look for more details on all the launch activities and participate as you're able.

So, with that, what I'd like to do is turn the floor to Mike Saylor.

Thank you, Sanju.

I guess I would like to summarize by saying that we're, of course, very pleased with our quarterly results and we're very pleased with the 2004 calendar year.

We believe that our financial success is the result of the focus we have on our business.

I think we're the most focused BI vendor at this point where we certainly believe that we have the best product in the marketplace.

We believe that we have the most integrated product and we've been working at it now for nearly 12 years on a single-code set and every single year we improve it a bit.

And as Sanju articulated quite well, we've had a lot of breakthroughs in the past 12 months.

We have plugged a hole that we had in report writing.

We have a great report writer.

We plugged a hole in the UNIX platform and now we have a great UNIX environment.

We've dramatically increased the scalability of our platform and, of course, with it, the robustness continues to increase and we keep finding new applications and new types of users and new types of customers and sometimes -- in a manner that makes us quite happy, new customers find us.

People will change jobs and when they get to the new job, they'll tell their new boss about this great MicroStrategy technology and we are starting to see just nice proliferation because we've done a nice piece of technology.

And there does appear to be a nice and growing demand for the technology we have in the market.

We're pleased with the BI market.

We're pleased with our ability to compete in the market.

I do believe that we're just experiencing extremely good organic growth as opposed to many of our competitors.

We haven't had to rely upon acquisitions or financial engineering to grow.

We're actually growing because we're inventing and we're selling and we're servicing a customer-base that's continually developing new applications and finding new value.

A survey came out recently, the OLAP report that indicated that of all the BI vendors, we have the highest customer loyalty rate.

And you can evaluate a company based upon dozens and dozens of metrics, but to actually see that our customers are the most loyal, I thought was very heart warming.

We're very excited about that.

It's indicative, not just in the strength of the product or the focus of the Company, but also of the strength of the services, and the talent of the people involved.

And so, 2004 ended on a very good tone for us.

We're surely looking forward to MicroStrategy World next week.

We're looking forward to the launch of MicroStrategy 8.

We think that some of the things we're bringing to the market will continue to allow us to grow.

I do want to say a few words about our disclosure and guidance philosophy going forward in 2005.

You know, in the light of an emerging and greater appreciation for the importance of RegFD and Sarbanes-Oxley, and in light of our understanding of our early evolving business every year as we understand it a bit better and we get more comfortable and more faster in the software business, we have review our disclosure and guidance policies and we have decided that it would be prudent to adopt a more conservative stance.

So we won't be disclosing the same operating metrics as we have in the past.

Primarily because we have concluded that they're not especially helpful looking forward and we want to make sure that we're evolving and providing helpful information that's in the best interest of the shareholders.

As Arthur pointed out, we believe that short-term financial forecasts are inherently uncertain and it's in the best interest of the shareholders for us to seize providing some of this guidance that we have provided in the past.

We think that it will allow us to operate the business more effectively and to focus upon creating shareholder value.

And so with that I would like to thank all of you for your support and I'm going to go ahead and open the floor for questions and answers.

[OPERATOR INSTRUCTIONS].Your first question comes from David Hilal.

Great.

I've got a few questions because I think I've got to get them all done here.

So, first, guys, I want to jump down a little bit on the Winn-ix product -- or on the UNIX product, Sanju, you talked about it.

Are you seeing a typical deal size on the UNIX platform larger than what you have seen traditionally or is it about the same size?

We're not tracking that metric exactly the way you describe it.

Certainly we do think that people who are buying into the 64-bit strategy in the UNIX strategy, I would say have a desire to grow in scale and so we think that they might, over time, drive more users onto the platform.

But we don't track whether or not we're seeing, more dollar value from, let's say a Universal Edition sale versus a regular sale.

What was it then in the blended ASP in the quarter?

Yes, we're not tracking that at this point.

So -- I mean that's been a metric you've given us, that's one of the metrics you're no longer going to give?

Yes, that's correct.

What about quota-carrying reps, what was that in the year?

Yes, David, we're not going to be disclosing quota-carrying reps, either, just the total head count, which is I think 945.

That's right.

Okay.

So, that will be hard to build the model.

What about channel revenue contribution?

Yes, that's another metric that we won't be tracking or disclosing, David.

All right.

How about of the multimillion dollar deals, how many were from new versus existing?

Yes, David, we're not disclosing that, either, at this point.

We just don't think it's particularly helpful looking forward.

All right.

Let me switch gears a little bit to try to have some success.

Mike, as you look out into the opportunity in the BI market and you look into '05, what type of growth do you think the BI market in general is going to have?

And are you a market share gainer or are you going to grow in line with the market or less?

I can't give you a hard percentage figure on the growth of the market.

I don't have so much confidence in my forecasting capability.

I think we're bullish on the market.

I mean we've had a really good year in 2004 and we feel good about that.

We also observe, at a micro level that our customers -- we don't have many customers using less BI and we don't have very many customers rolling deployments back.

So I don't see customers saying I had 5,000 users last week and I want 2,000 next week.

So, generally everybody's deploying more applications to more people and if you talk to them, I'd very seldom hear a customer say it's not as valuable this year as it was last year, and so generally the application value metric keeps expanding.

The usage metric keeps expanding.

The number of applications keeps expanding.

And obviously, we would all like it to expand as quickly as it can and there are always some initial components that, are real world considerations, to hold people back from realizing every possible idea they have.

But, we feel fairly comfortable with the market and, of course, we like our competitive position and we have, over the past couple of years, grown a bit more organically than our competition.

We think that we're growing faster organically than a Cognos or a BO.

As for the future I think, we're taking a set of assets into the marketplace that look pretty good to us, so we're pretty pleased with our prospects.

And do you care to give any range for the growth of the market in your eyes?

I can't give you a range, David.

Okay.

I want to switch to one of your competitors who has a rollout product coming out this year and it's obviously going to be a first generation, so, my thought is going to lag, from where you guys are at.

But I'd love to get your take on that, if you guys have done any homework on it and what your thoughts are?

Yes, we understand that -- I believe you're referring to Cognos, that they intend to put out a rollout product this year, and so we congratulate them on that.

We've been espousing the benefits of [indiscernible] for over a decade now.

And so it's good to see other people finally catching up.

I do think that we've been working hard on a relational OLAP engine for the last decade and it's not an easy piece of technology.

Folks like IBM and others have tried it in the past and have had some mild success, but not the kind of success that we've had.

So, I think that it's not easy to do.

They're a smart company and a very capable company, so I'm sure that over time they may do something that's useful.

But I agree, it's a first generation product and it will take them a long time to get it right.

Hey, Art, on the capitalized software number, obviously was up.

I'm assuming with MicroStrategy 8 coming to market, if that's accurate, should we assume going forward capitalize software should dip back down?

I really can't make a whole lot of projections on what we're going to be doing in the future.

It just depends on our development activities and how things go on that side.

But you're right, the 2.8 is related to MicroStrategy 8, which the release is coming up shortly.

Yes, so, and, of course, it's tied into the beta cycle and the beta cycle ends as we ship the product.

And then we'll probably go back to a more steady state R&D for a while.

For kicks, my last question is another metric you've given in the past and that's new product contribution as a percent.

Are you going to give that or no?

Yes, we're not going to be tracking that or disclosing that going forward, David.

All right, I'll pass it over, thanks.

Your next question comes from Mark Murphy.

Hi, good quarter.

Very heartwarming.

Art, I'm wondering if you can give us the breakout between the maintenance revenue, consulting, and education?

Yes, we're not going to be breaking out our service lines going forward.

Okay.

But --.

Do you have a number for the last 12 months attrition?

We don't have that number and we won't be disclosing that, either.

Okay.

Do you have -- were there any 10 percent customers in the quarter?

Yes, we don't have an answer for you there.

I suppose we will be reviewing that and if there were, we will be disclosing that in the 10-K.

Okay.

Would it -- do you have an estimate on maintenance renewal rates?

Or has that been consistent?

We're not tracking that.

Okay.

How about anything on verticals, any material changes there?

We won't be reporting our vertical splits, so, we really have nothing to report or disclose at this time.

Okay.

Question for Sanju, then, maybe there's something a little more qualitative in nature.

As we look forward to MicroStrategy 8, I think in some ways it sounds as though it's been positioned as kind of a free upgrade for customers that are current on maintenance.

So, I'm curious if you can explain -- if you can maybe explain which of the modules would be charged for us separately, assuming that there will be some?

And then also, would this be more or less of a revenue catalyst compared to say 7i?

Sure, while -- I can tell you what we know and then in terms of what we think the revenue opportunities are, I'll comment brief on what they might be.

Certainly MicroStrategy 8 is an in-line upgrade for folks that are on maintenance or for customers who are active maintenance-paying customers today.

They will receive MicroStrategy 8 as a maintenance upgrade free of charge.

Number two, there are a number of products in the MicroStrategy 7 and 7i product line and so MicroStrategy 8 upgrades sort of span the entire product line.

So there are upgrades to our Intelligence Server, our web products, our Narrowcast Server to OLAP Services.

And so depending on which products you have bought, you might receive some or all of the upgrades that we're rolling out in MicroStrategy 8.

We're hopeful that with MicroStrategy 8 a couple of things will happen.

One, that it will encourage people who maybe haven't upgraded to the full product line to buy some of the products that they have not bought.

One example of that would be Report Services, so, there are a number of enhancements that we have made in Report Services to make it more interactive and more usable and so we think that will drive additional sales to customers that have not yet purchased it or have been maybe sitting on the fence and have tried it but did not full-scale deployed it.

Number two, because, of course, we are expanding the data sources that are going to be accessible with MicroStrategy 8 and improving the reporting capability, we'd think that a whole new market may open up to us and that's been the -- that is the Operational Reporting market, where historically people have been thinking about us more for reporting on data warehouses or data marts.

We think that this large untapped market for MicroStrategy, which is operational reporting, should open up for us with the launch of 8.

So while it's not by itself a for-fee product upgrade, we do think it will engender a tremendous number of new opportunities that we can then take advantage of.

Sanju, on that topic, just as a follow-up, I noticed in that in the -- at the user conference next week in Vegas, there's actually going to be a track on migrations from Crystal to MicroStrategy Report Services.

So, I'm wondering if you can maybe talk just qualitatively about the mix of deals that you currently -- that are representing migration from, other vendors' products?

Sure, I mean when we launched Report Services, one of our initial marketing and sales thrusts were to go back to our current customers who had put MicroStrategy on top of their data warehouse for analysis, but perhaps were using other products like Actuate or Crystal for reporting.

And say, oh, by the way, you've already built the Metadata on top of your data warehouse, why not use this across the entire warehouse?

And we've had very good uptake with that initiative and so we have seen a lot of people who have started to usher out the use of multiple tools.

I noted one which was Oakwood Homes that started with us really for analytics and then ultimately phased out their Crystal environment to use Report Services.

And I think that while I don't have numbers to support how many customers have done that, certainly that's been an intention of a lot of our customers who have bought Report Services in the first year.

So, we expect that to continue.

The track that you referred to at MicroStrategy World, again, it is to help people who are struggling with that same issue, which is how do I move more quickly off of Crystal Reports on to a more robust second-generation reporting product.

How do you in fact do that and maybe leverage the best practices of other customers that have done that before them.

Okay.

One last one.

Sanju, on the topic of angel and alarm.com, excuse me, I've been noticing, maybe a little more publicity coming out of the Company on both of those projects or business units and it looks as though you're finding some success.

Is that, from your perspective, do those businesses fall under the umbrella of being focused on BI?

Or is that something, you know, you're looking at that as sort of a different part of the business that maybe gets spun out at some point?

Sure, well, certainly we think about our business holistically and even as we started up Angel, which is one of those 2 units, the voice technology that we started to develop, we thought might one day have applications to BI.

It's unclear that it has applications immediately.

Having said that, by itself as a stand-alone business unit, its prospects are exciting and I think quite useful for the market at large.

So, as we move from an R&D phase into having a business which, in fact, can make money and is starting to make money, we've decided to publicize it a bit more.

Whether or not it ends up converging with Business Intelligence again, I can't predict.

But certainly we do see that there might be at some future point some convergence, but today it's a great stand-alone business by itself and we're happy to promote it and we will promote it in 2005.

Okay, thank you very much.

Your next question comes from Frank Sparacino.

Hi, guys.

I know you're not offering quantitative guidance, but Mike, I didn't know if you'd care to comment just on a qualitative fashion anything regarding '05?

I'm looking forward to 2005.

We're happy with 2004.

We had a lot of momentum and we've got a great product line going into 2005.

We've got, you know, like any technology company that's bringing good technology to market, is happy to see the future, coming to us.

So, we're looking forward to the year and we're looking forward to see how the technology plays out in the marketplace.

And we're kind of excited to be able to deliver MicroStrategy 8 to our customers because as Sanju said, it's a maintenance upgrade.

So it means that we've got something which is going to be relevant to every single one of our customers this year.

And presumably it's going to hopefully allow us to get engaged in some other discussions that might be good for our business.

Maybe the next question is for Art.

Art, when you look at the effective tax rate for 2005, what's the actual cash taxes that are being paid?

It's really difficult to predict that at this point in time for 2005, Frank.

But during 2004 you can see in our cash flow statement we paid about 2.6 million in taxes and, that's where we ended up for 2004.

I mean would it be fair, Art, to assume, that number has to be materially higher than it was last year?

Well, we'll continue to carry our NOLs into next year and, that, will have an impact on the cash that we may or may not pay next year.

Maybe a better way to ask it, Art, would just be, I mean am I safe to assume that it's substantially less than the effective tax rate of 30 percent?

Well, the tax that we incur next year is really going to be dependent upon the profit or loss of the Company and at this point in time, we're not able to predict that.

So, it's very difficult to say, what portion will or will not be taxed, Frank.

I hope that helps you.

No, it's fine.

Maybe Sanju, a question for you.

If you just talk about with 8, some of the new product beveling and pricing that you guys are going to be rolling out?

Well, at this point we haven't announced any new product bundling or any new pricing broadly.

And so while we're contemplating that there might be some bundles, that we will put together that will be roll-based that we'll roll out broadly, at this point, we haven't made any broad announcements.

And so it would be premature for me to announce anything here.

Okay.

And then maybe shifting gears, last question would just be on the maintenance side.

Any changes in terms of maintenance rates?

Is there going to be another maintenance increase now that 8 is rolling out?

Yes, we don't have anything to publicly disclose regarding maintenance on the call here.

So, we don't have any insight for you there.

Okay, thanks, guys, I will turn it over to somebody else.

Your next question comes from Patrick Mason.

Yes, I'm just curious on your reasoning for not giving any metrics on the quarter itself?

I hear a lot of, we're not tracking that.

I can understand not giving guidance, but I don't understand the not giving any specifics on quarterly metrics.

Yes, this is Michael.

You know, we can certainly breakdown the business and we can generate hundreds or thousands or tens of thousands of statistics.

And we think that to a certain degree it's prudent as we grow the business, is to evaluate how useful and, how effective that strategy is to the shareholders and how good it is for the Company.

And we think that the numbers that we're disclosing here speak for themselves.

They're of interest and for that reason for us to disclose a bunch of other information that may or may not be relevant and then to try to make sure that everybody understands exactly what it does or does not mean from time to time is not the best use of our communications capabilities.

And I don't think it benefits the shareholders.

So looking forward, we just think it's much more prudent to take a more conservative disclosure stand and to disclose a few things very, very well and then to make sure that we're not just throwing numbers and metrics and things out there just to throw them out.

What are you actually disclosing, I guess, very well, I mean as far as, what are you giving us?

I mean you've got the Press Release and you've got the P&L and you've got the balance sheet and you've got the cash flow statement.

So, just the financial information, public financial information.

Okay.

I was just curious -- I mean, you know, because we're trying to actually, compare you to some other companies and they give out, just the quarterly information, which would be helpful, I believe, in my opinion it helped me.

So I was curious.

You're basically taking the stance that it's not helpful to analysts or investors.

So --.

Well, I would take the stance that it's probably more interesting for us to compare our product to their product or the fact that we have better customer satisfaction than they do or we have a more scalable product than they have.

Or we're organically growing faster than they're growing or we're more profitable than they are.

All of which are in our public disclosure.

You can see our operating margin versus theirs, you can go pull the OLAP report and you can see tons of information on what our customers think versus the competition.

You can pull our manuals and you can see our product has more features than theirs or it's different.

I mean all of these things are interesting to customers.

We want to focus the world on those things and we just think that that's more prudent disclosure to be making.

Okay.

Can you give me any comment on whether or not you guys hired anybody this quarter?

We ended with 945 people, so, you can compare that to where we were last quarter.

All right.

And as far as just your NOLs, where do they stand right now?

We're checking into that right now.

Okay.

Lastly, obviously you had a very good quarter.

What caused customers to go ahead and buy, the existing product versus waiting for 8.0.

Any kind of color around that potentially?

I think your question was what caused customers to buy the existing product instead of waiting for the 8.0 product?

Yes.

I mean there's obviously -- you know, sometimes people will go ahead and buy ahead of that product.

I was just curious if there are any kind of color you can give that?

Yes, I mean I think that even the current product that's in the market is incredibly competitive and is regarded by many people as premier Business Intelligence product in the market.

And so I think that even without the 8.0 marketing or selling or, disclosures, customers have been extremely happy with the current product.

So, I think we've kept it at the 8.0 product relatively speaking under wraps.

We haven't really tried to push that energy out to the market and so even if customers knew it was coming, they didn't know much about it and in some sense that was on purpose.

We tried to make sure that we continue to push what we had to sell.

All right, thanks a lot.

Your next question comes from Mark Verbeck.

Thanks a lot.

Another question on just the current quarter and what kind of caused customers to be spending, do you have any thoughts on that, Michael?

Well, I mean we're pleasantly surprised.

I mean the fourth quarter is traditionally an interesting quarter in the software business because people tend to complete their budgets, you know, the question is always how much will they have in their budget to complete?

And you can't really be sure, but, when the fourth quarter is a good fourth quarter, then it's good and when it's not good, it's not good.

But maybe there's a little more volatility in a fourth quarter than there would be in other quarters.

I think that might be part of it.

I think that we've been consistently focused upon a plan and we've been doing it for now 12 quarters in a row and for those of you who have been following us as a company and have seen us for the past 12 quarters, you know there are certain themes we've been pitting on.

And when you keep hitting on the theme over and over and over again eventually it seems like it starts to make a bit of an impact.

So maybe the fourth quarter is just the point where we started to see some more effectiveness of some of those investments we made a long time ago.

I think we did arrive with a good product line and we had the UNIX support by the fourth quarter and that's nice.

I'd love to give you some other penetrating insight but don't really have it right now.

Okay.

On the customer satisfaction, what kind of things are you doing to -- that are helping you in that arena?

Could you just say that again?

Sure.

You mentioned the high customer satisfaction numbers in the OLAP Report.

Do you have anything in particular that you attribute it to?

Is it the product?

Have you taken any steps to improve customer service?

Early in the year, we were hearing some rumbling that there were a couple of dissatisfied customers.

So it's nice to see that you guys can stand out on a metric like that.

I would say that our Company has been known for having extreme customer satisfaction with the product and people have always been extremely happy with the product for a couple of reasons.

One, we've architected it so that people don't run into brick walls halfway through their deployment or their implementation.

So, with other products maybe they can't scale the number of users very well or get they can't get to all the data or they can't run the right analytics.

And so they only find that out halfway through their deployment.

And so we're in, I wouldn't call it a mature market in BI, because certainly it's evolving pretty aggressively.

But I would say we're certainly in a replacement market in large sectors of the BI market, where people have already tried competing a Report Writer or maybe an OLAP tool and they've already had that first generation experience.

And they're now coming to MicroStrategy saying, we got trapped into a corner or, you know, pushed into a corner that we didn't want to be in and it seems like you offer a way out.

So, I think that generally speaking what's driving the customer satisfaction ratings is that people feel like they have a lot of running room and a lot of headroom with MicroStrategy that they don't have with other products.

And so it's that [expensability,] which I think gives them a lot of comfort.

Okay.

And then specifically on the replacing other reporting solutions, what's the value proposition there?

What's the message you go to with your customers, is it just -- it's more efficient that you're getting this all from one vender or are there other components that you're selling there?

I think the 2 demand drivers that I'm seeing quite often are number one scale.

People are saying, these reports were find to deliver to a 100 people using some other tool, but now we want to go out to a couple thousand people and so that's been a big driver.

And scales somewhat driven by Web deployment, so a lot of folks have existing Windows-based Report Writing Solutions and now they're ready to move to the Web.

And so they're out looking and saying, Well, I'm going to make a change anyway, because I'm going to go out over the Web, who does that best?

And so they're coming to us.

And then the second issue is what you really hit upon, which is standardization.

Does provide some cost benefit and some other benefits to a corporation.

So they're interested in scale and they're interested in standardization.

Okay.

Great.

Thanks a lot.

Your next question comes from Tom Ernst.

Hi, it's Sujata Wasudev for Tom Ernst.

I was hoping you could talk a little bit about the macro spending environment.

Any changes that you're seeing there?

And also how much of this quarter's performance you would attribute to an improvement in the macro spending environment as opposed to sales execution?

Yes, we don't have an opinion on the macro spending environment.

We think that, the things that we can control are how hard we work in the quarter and the quality of our sales and service activities and the quality of our technology.

And we're pleased with the technology.

We're very focused upon sales and services and, we had some good fortune in the quarter and so, I think that all those things come together together to give us the results.

Okay.

And then perhaps on a qualitative level, could you talk about your overall competitive win rates?

We don't really track our overall competitive win rates and so we don't really have anything to disclose in that area.

Okay.

Thanks.

Your next question comes from Nathan Schneiderman.

Hi, thanks a lot, nice quarter.

I have a series of questions.

Art, I -- welcome to becoming CFO with the Company.

Congratulations.

I have --.

Thank you, Nate, I appreciate that.

Thanks.

I have a couple of questions for you to start.

Do you feel there is any low-hanging fruit that you've identified on the expense structure side or otherwise that you'd like to share with us?

Yes, not at this time.

I mean we're always focused on trying to manage costs as effectively as we can and, that's what we do day-to-day.

I mean do you think there is some or you're not sure about it at this point?

I think that's something that we'll just continue to be focused on in the future and I just -- I don't really have anything specific to point out right now.

Could you share with us any, let's say philosophical differences you have versus the way Eric Brown managed the operations or viewed the business?

Yes, Eric and I worked together very closely for the last 4 years and I think there was a lot of continuity and I just expect to continue in the tradition that we've been working together in over the last 4 years.

You know, I was VP Worldwide Controller working with Eric and, will continue to do the things that we were doing.

Art, could you give us an update on effective tax rate expectations for '05 and '06?

Or are you still comfortable with 30 percent?

And then for '05.

And then for helping us model, what should we be thinking about for '06?

Yes, I think, you know, as we pointed out earlier, we're not going to be providing guidance going into 2005 and thereafter so I really can't comment on what the tax numbers will -- may be.

Okay.

In case you meant to give it to us but forgot, would you be able to provide percent new versus existing customer split?

Yes, we're not providing that kind of disclosure.

Okay.

Michael, I was hoping, even though you don't want to talk specifically about where you ended with quota reps, can you talk qualitatively about the extent to which you plan to hire in that area in 2005?

What sort of growth you'd be expecting in the sales organization?

I can't give any specific figures.

We are an enterprise software company and so our success is going to be based upon putting it into the field a really good enterprise software sales force.

We've been pretty pleased with the one we've had.

I do expect that we will grow the sales force over time and we will try to do that, prudently and, as opportunities present themselves.

Do you think given the imminent release of the Version 8 product that you'll be able to maintain fairly stable levels of R&D?

Or do you see continued growth in R&D investments in 2005?

You know, we're not -- we can't provide any guidance on what our R&D expenditure level will be in 2005.

We're excited about MicroStrategy 8 and we're excited about our technology team, they are a really good crew of engineers and they've been at it and working together for quite a while.

And I think they're becoming very, very efficient.

We just try to make sure that we manage the technology function so as to keep producing really, really high quality products and that's a very organic process that we've grown to appreciate.

Michael, could you provide an update on the competitive dynamics, anything changing, at the margin?

Are you seeing Siebel, roll out solution anymore than you have or anything else in the environment that is changing from a competitive point of view?

Yes, this is Sanju.

I will just comment briefly to say that, the recent OLAP survey, I thought was instructive and I would encourage anybody that's a follower of this market to pick that up and read it.

And we'll be posting probably over the next week on our website a summary of that OLAP survey.

But the reason I direct you to it is it's the only statistical survey of the entire BI market and talks about different competitors and their market share and which ones had significant share and didn't because it's a survey of a couple thousand different companies.

To your question about Siebel Analytics, I think that in the survey they came out to not have enough folks that had actually deployed the product to even rank -- to be rated in the survey.

Other companies, obviously that we don't think about too often, did rank to have a number of installed base users, guys like [Aplex] and other folks that we don't think about very often, but who are real world out there and are deployed.

So, if you wanted to get a more statistically significant view of what's happening in the market rather than asking us anecdotically, I would encourage people to go to the survey.

Because I think it's insightful for everybody.

And Sanju, one last question for you.

With the Version 8 product, for a user that currently has pretty broad use of your existing product, are there going to be new modules that they can potentially buy with the Version 8; for example, maybe in the data mining area?

Or the SAPBW access area that would not be included as part of the maintenance upgrade?

As I indicated before, all the features that we're deploying in the 8 release are going to be on maintenance.

There are no new products as part of the 8 sort of release.

However, because the features are distributed across a number of products, we do expect that products that maybe people had looked at but for some reason weren't ready to buy or didn't feel like they had all the pieces they wanted, they now will become more attractive to existing customers.

So, we expect it will drive new opportunities for us, like I said, Operational Reporting, maybe SAPBW-type reporting opportunities that we've been excluded from historically.

And will also derive for us [up-sell] opportunities for products like Report Services or OLAP Services where people maybe looked at and said, you know it's pretty good, but I could use a couple more features.

Well, we've now added those features and so maybe they will come back and buy.

So we're bullish.

We think it's a great service to our customer-base obviously, that we're releasing such a strong platform release, undermaintenance, free of charge for everybody.

I don't know that that's going to drive loyalty, but certainly I hope it drives loyalty and it should drive loyalty.

But I think the bigger picture issue is we're very pleased to bring it to market and we do think it's going to open up new opportunities for us.

Yes, if I can piggyback on what Sanju said, when we think about selling and growing our business, one way to grow our business is to take a customer that was using, say a Web interface and convince them, persuade them they should use our Narrowcaster product, as well.

Another way to grow the business is to take a customer using a Web interface and upgrade them to a more functional Web interface.

A third way to grow the business is to take a customer that's using our product in the Enterprise Version and get them to upgrade to the Universal Version, which is more scalable in the 64-bit.

A fourth way to grow the business is to convince a customer that they can now build an application that they couldn't have previously built so that we actually get embedded into a different project in the Company.

And then, another way is to convince them to expand to more users on an existing application silhouette.

And then none of those ways, actually, touch on the opportunities to sell additional services to the customer or the reference value that we get when customers like what we're doing and they take us into new divisions or new departments.

So, all told, there's probably 7 or 8 vectors that we can go down in order to grow our business and, sometimes it defies a simple analytical or scientific equation that tells us exactly which of these areas is going to result in the most money and again, in a 12-month time period.

But even though I can't necessarily describe it with a, perfect set of differential equations, I can tell you anecdotically that having watched it for a decade, we generally know that if we're delivering high quality modular technology that customers can put together, in order to solve their needs, the marketplace is going to find a way to use that and generally they open up to us and bring us into new opportunities.

And they allocate a greater share of their budget and they generate a greater share of their value from what they're doing.

And that enhances our competitive advantage.

Thanks a lot, appreciate it.

Your next question comes from Peter Goldmacher.

Hi.

I can't help but notice the irony that a BI vendor isn't tracking any business metrics.

I just want to make sure that we're not talking about a product issue here?

We appreciate the irony.

We're continually evolving, how we track our business and how we monitor it and there's probably not a month that goes by when we don't sit and review it again in a different way.

We're just trying to make sure that what we're disclosing is consistent and useful to the public.

Okay, thanks.

Your next question comes from Pat Walravens.

Thank you.

Art, I guess this is for you.

Do you think that the Company had an effective internal controls on the financial reporting as of December 31st?

Well, at this point in time we're still going through the process of the SOX 404 process, which leads up to the filing of the 10-K.

So, we're going through that process right now and at this point in time we don't have anything to disclose.

Okay.

Thank you.

Your next question comes from Michael Nemeroff.

Hi, guys, nice quarter.

Michael, which company have you modeled this new disclosure or nondisclosure, let's say, model after, is there any company out there that you've kind of modeled this after?

Well, I mean I would note that Berkshire Hathaway has been a very successful company for quite a while and they have a fairly conservative disclosure model.

We also just noticed that Google came public and they have a "no guidance disclosure" philosophy, as well.

And, of course, there's companies like Coca-Cola that are not providing guidance.

So I think that there are many, many companies out there in the marketplace that are starting to review things that they did in the past, in light of Sarbanes-Oxley.

And I think Reg-FD, although it's been in the market for awhile, is being understood in a much, much better context now with a bit more time under our belt.

And so I wouldn't be surprised if we don't see more and more companies adopt a more conservative stance with regard to disclosure going forward.

Given that you have spoken lowly of BI companies that have done acquisitions in the past, that doesn't sound like you intend to do any and plan to grow the Company organically.

And the Company is throwing off a good amount of cash and you do own a significant amount of the voting stock.

Why don't you just take the Company private?

Yes, I really can't -- even know how to address that.

It seems kind of speculative at this point.

We are a public company, as you know and we expect to remain a public company.

Okay.

Thank you.

Your next question comes from Doug Crook.

Thank you very much.

A couple of questions.

As an enterprise software -- well, I will just ask you for -- well, as an enterprise software company, what do you think was a appropriate target operating margin before a growing enterprise software company is underinvesting?

Yes, I don't think that we have -- we think there's any particular golden number.

I think if I had encyclopedic knowledge of how the universe worked I might be able to give you an answer, but it seems like in the real world that there are lots of different business models and they all seem to work.

I know, for example, you can spend a lot more money developing software or you can spend a lot less money developing software, depending upon how good the software architect is.

So, I remember from my own experience that a really good architect will come up with an extremely elegant design that can be coated in 1/10th the time or 1/100th of the time of a really horrible architect.

I certainly can imagine a business where you find a way to inefficiently run it such that you really can't generate a margin.

I can imagine businesses where they're extremely efficiently run and then, of course, the marketplace changes what the customers expect and so to the extent that the marketplace evolves quickly and there is a lot of volatility out there, you have to keep recoding software.

But if you end up lucky like say Microsoft shipping Excel and they get to have a team of, who knows how many people, 50 people or 100 engineers and they get to sell 200 or 500 million copies of it, you happen to get a really nice software business for a while and that remains the case until the marketplace evolves.

And so I can't really speculate on how the market will evolve.

I can say that, we're very happy with our results for 2004 and for Q4 of 2004.

And we feel like our technology is better than our competition and we feel like we're evolving it at least at the rate that anybody else is evolving.

And so we don't feel disadvantaged by being a bit smaller than a Cognos or a BO.

I think that if we look at our bigger competitors, they've been bigger and historically spent a bit more money, but they've also historically spent it on 2 or 3 or 4 or 5 different architectures.

And from my experience if you have 3 architectures, you have a problem that's nine times as hard and your customers have a problem that's ten times as hard, as well.

So this entire business is about how do we engineer a piece of software or a tool set efficiently and then deliver it out to customers who can then embed it in their application efficiently?

And if we're doing our job, we create new functionality and they can upgrade quickly and easily without wasting a lot of their money.

On the other hand, if we take an example like Business Objects, if they buy Crystal and they actually want to upgrade all the Crystal customers they have to come up with a migration strategy and when they migrate the customers over, the customers incur some huge expense.

And so you might very well come up with a business model where the software vendor manages to avoid the expense and the downstream customer takes it on or vice versa.

The software company might take on expense and try to absolve the downstream customer having to take it on.

But ultimately, if there is one maybe important theme to this entire discussion, it's architectural elegance and homogeneity is always an asset in our business.

And whenever you have homogeneity and inefficiency or a lack of elegance or a lack of mathematical power or polymorphism of any sort, you end of forcing down the supply chain, a very inexpensive -- expensive set of components that are hard to use and hard to get value out of.

And if the customer can't get value out of them, then you end up paying the price by having to provide more customer service or you end up paying the price by having to spend a lot more on marketing to get them to buy a bad product.

Or you pay the price by having to spend a lot more on sales by having to spend more sales cycle time to get the customer to buy a product that would have sold itself if the product was better.

And so resonance is a really good philosophy here and if you have the right product at the right time and the right market, you can resonate in a very, very small input of energy can generate an extremely large output.

And so we try to achieve resonance with the market as best we can and, unfortunately, we don't have control over the market.

The customers have some control.

Microsoft and IBM and Oracle and SAP have some control and our competitors have some control.

And so to the extent that we try to stay ahead of the curve, we will be more efficient.

And our natural, effective operating margins will be a bit higher and to the extent that we fall behind the curve, we will get less efficient and we'll resonate, maybe not quite so good and we won't have natural margins or sustainable margins quite as high.

I hope that answers your question.

Well, actually it was a great response and if the Company is achieving resonance and small energy can lead to big output, at this point, what factors are constraining topline growth?

I think in the enterprise software business you're constrained a bit by the budgetary process of the downstream customers.

I mean even if I had, you know, God's gift or the cure for cancer there's some companies that just physically can't allocate a budget of more than "X" or raise their budget by more than "X" in any given time period, even if, you had the perfect product.

They're just not going to budget more than a certain percentage a year.

So, budget changes are one impact.

I think the other constraint on topline growth is the competitive effectiveness of not [in kind] enterprise offerings.

What is SAP doing out there?

What is Oracle doing out there?

What is IBM, what is Dell doing out there?

Even though we would never be replaced by any of those vendors to the extent that those vendors are more effective and, fighting for their share of the budget, then that impacts what we can do.

I think the third impact on our, topline growth is what our competitors do and how effectively they actually market and sell their wares and if they bring any good products to market.

And then a fourth impact of course, is what we do.

I mean our own execution.

And I think probably it would be irresponsible for me not to say that at the end of the day, we have to look in the mirror and focus on our own execution and how good a job do we do managing our own sales and service staff and our own communications to customers and our own operations.

Because we can't really control the other 3 and we could speculate about whether they did a good thing or a bad thing this month, whereas if our -- with our own operations we can control them to a greater extent and when we are doing a good job, we are more likely to know that.

Okay, that's very helpful and now for a more conventional question.

DSO was up sequentially, can you share a little color on what's going on with receivables and what does the Company view as an acceptable range for DSO?

Yes, I think the year-end DSO at 52 days was actually a three-day improvement over the 55 days at the end of 2003, so, year-over-year it was actually slightly better.

You know, Q4 we tend to have traditionally higher run rates of revenue which can, tweak the DSO by a couple of days.

So, we're happy with the DSO where it's at.

Is there a range that the Company targets?

We don't have a specific range but I mean the numbers that we're seeing right now seem comfortable to us.

We're comfortable with them, and again, in this case, we had a really good licensed quarter and licenses tend to drive DSOs and so it's, you know having a little bit of a blip up from Q3 or something is probably not a bad problem to have.

If we have to pick one.

And as Art said, we feel good.

Year-over-year.

Okay, thank you very much.

Your next question comes from Devang Kothari.

Hi, guys.

A couple of questions.

One, how is your new disclosure in guidance policy initiated?

Is it something, you know that you've thought about for a while and initiated internally?

Or was it suggested by Counsel or auditors or any other third-parties?

We're always evaluating our disclosure policy and getting the best advice we can.

Okay.

I guess you're not disclosing that.

Do you -- could you comment on maybe if you feel that you have a greater advantage in sales cycles where the IT part of the house has a greater influence or the purchase or does it really not matter?

I would say -- this is Sanju, I would say historically we've sent our sales force to talk to the IT buyers and spend a little bit more of our time and their time with the IT buyers and that's because of the benefits that we've brought to market in terms of architecture and scale have really been something that those folks appreciate more than maybe the business-users do.

That may change here, certainly it's been changing with the evolution from 7 to 7i and now to 8.

As more of our technology seems to be better appreciated by business-users and even demanded by business-users.

But even as we start to reshape the interface to be business-user focused and centric, I think what you're going to find is that we will probably be more competitive even going straight to the business buyer.

But I'd say historically your comment has some validity, which is we've trained our folks to go a little bit more aggressively to the IT buyer.

Okay.

Thank you.

That's all I had.

You have a follow-up question from Frank Sparacino.

Hi, guys, just maybe 2 last questions.

One would be on the international side.

Clearly there was a marked improvement in '04 over '03.

And I'd just be curious, any feedback you can give on that side?

I think, internationally we're in a business that's all about execution and we've got some new personnel internationally that have been working very hard on behalf of the Company.

I think that we as a company have been aware that we wanted to grow international a bit more and we've focused a lot of our energies at the corporate level on international sales and services growth.

I think that there is a big late in demand and has been a demand internationally, and especially in Europe, for software like we have.

And, perhaps we're getting a benefit from, macro economy changes due to the European Union or something.

Also, I think that we'd be remiss not to point out the obvious, which is that the Euro -- the Euro and the Pound have both been extremely strong currencies and certainly over the past 2 years have strengthened from where they were back in 2002, and as a net exporter of software, we do benefit.

We have cost in Europe that are denominated local currency, but we're generally making money there.

So, if the Euro strengthens or if the Pound strengthens, that's a benefit for the Company and, we're happy to see that helping us.

You can't speculate on where currencies will go, though.

So, we try not to rest on our laurels and we focus really upon, generating as profitable a business as we can on -- in any given country where we're doing business.

All right, and last question, Mike.

I know you guys have been focused on, for some time, software license compliance and I'm just curious if you can give an update as to where you stand in that process and, how much of a factor was that in 2004?

You know, our real focus has always been create a really, really good product and then our second focus is make sure we put the right sales and services people in the field to sell it.

And ultimately that's the lifeblood of an enterprise software company.

I mean occasionally we have some compliance issues, they almost always get worked out very, very quickly.

And so I don't have anything particularly interesting to say about the subject.

We're much more interested and much more excited in developing good software like MicroStrategy 8 and what really keeps us up at night is, can we put in place the right people and the right relationships with the customers that we need to cultivate in order to continue to grow and create value.

Because the only -- I mean the only way to really secure our business is we create extreme amounts of value with innovative technology that they can't get anywhere else or that they get best from is.

And so, that's the primary focus of the Company.

Thanks.

Your next question is from Wendell Laidley.

Yes, first, you know, congrats on the results.

Pretty amazing.

My real question is centered around this notion of guidance and that is -- You know, there are 2 things, one is not providing any metrics around the business creates this sort of black box perception that you don't know what you're buying if you're not aware of, what some of the moving parts are within the Company.

So, it seems very nonsensical to me why you guys would choose not to disclose things like quota-carrying headcount and many of the other things that have been asked on the call.

So that's question No. 1.

Question No. 2 is -- I'm wondering if the absence of guidance going forward is really, an invitation for more volatility to the extent that you're going to be judged on consensus numbers that have zero guidance behind them.

Is that the kind of environment and world you want to live in?

Yes, Wendell, this is Michael.

You know, again, there are lots and lots of numbers that we could generate, but we just don't think that they're particularly helpful to be putting them out in the marketplace -- and we're not particularly focused nor do we think that a Management Team should be focused upon the stock price or the volatility.

The stock will find its appropriate level.

What we're focused upon right now is trying to maximize long-term shareholder value and we think that long-term shareholder value is about us creating great technology and selling it to lots and lots of customers and generating financial results.

Of course, every quarter we do put out the financial results and so the marketplace will be able to track whether or not we're actually making progress against our primary goal, based upon all the financial disclosures we do make.

Well, Michael, you're taking away both sides in the metrics about the business that are supposed to help us understand and predict future performance.

At the same time you're taking away, any guidance for numbers going forward.

So, I can understand one or the other, taking away both at the same time, shortly after, arguably a very well-respected CFO moves on, is just, a recipe for a lot more chaos, and I'm probably not the only one on this call that feels that way.

So, I'm wondering who gave you the Counsel outside of the CEO office that would make you feel like this is good for the business, good for shareholders?

Again, we think that the best long-term interest of the shareholders are for us to focus upon our software business and to sell software as opposed to selling stock.

We're out here trying to sell software.

And, I don't really have anything particularly constructive to offer except for the fact that we very carefully considered all of these things and, we do have a bit of experience in the business.

I mean I did found it, so I remember it when it was just 1 employee, about 15, 16 years ago.

So I've seen it for quite a while and our belief is that in the current environments, what's most constructive is for us to take a more conservative and prudent approach toward guidance and disclosure.

And so that's what we're doing.

Okay, thanks.

Your next question comes from David Hilal.

Yes, it's a follow-up.

On this topic of your new view on communication with the Street, has your view, in terms of meeting with investors throughout the quarter, has that changed, will you continue to do that?

Yes, David, we are really focused upon making sure that all of our communications are RegFD compliant.

So, I don't think that anybody should expect us to communicate any material information regarding the Company in a non-RegFD format.

I mean I might be happy to have a Coke with you or dinner, but we don't expect to actually meet with investors or any other analysts of the Company outside of a RegFD format where we're able to ensure that everything that we disclose is made publicly available to the entire investor community.

So, i.e., without the Webcast, no meeting with investors?

If we can't ensure that it's a RegFD compliant format, then we're not going to meet with investors.

Got it, thank you.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers.

Mr. Saylor, do you have any closing remarks?

Well, I would just like to thank everybody for being here today.

We appreciate your time.

We're really excited about Q4.

We're looking forward to 2005.

We do have more than 1,000 customers coming to our MicroStrategy World in the coming week.

I think it's going to be a great conference and so to the extent you'd like to find out more about our customers using our software or the technology itself, we'd love to have you come.

It's in Vegas at the Venetian and we will start the thing Monday evening and it will be running Tuesday and Wednesday.

So, hopefully you can come join us.

Otherwise, we will, of course, speak with you again in 12 weeks.

Take care.

Ladies and gentlemen, this concludes today's teleconference.

You may now disconnect.