Microstrategy Inc (MSTR) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MicroStrategy second-quarter 2014 earnings call. (Operator Instructions).

I would now like to turn the call over to your host, Michael Saylor. You may begin.

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

I want to welcome you all to today's conference call regarding our 2014 second-quarter financial results. I'm here with our Presidents, Paul Zolfaghari and Jonathan Kline; and our CFO, Doug Thede. First, I'd like to pass the floor to Doug, who's going to read the Safe Harbor statement.

Thank you, Michael. Various remarks we make about our future expectations, plans and prospects may constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform 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 most recent quarterly report on Form 10-Q filed with the SEC.

These statements reflect our views only as of today and should not be reflected upon as representing our views of any subsequent date. We anticipate that subsequent events and developments will cause the Company's views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so.

Also, during the course of today's call we will refer to certain non-GAAP financial measures. A direct conciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today which is located on our website at www.microstrategy.com.

Thank you, Doug. As many of you know, we've recently changed our policy on speaking with investors and financial analysts and this call is indicative of that policy change.

It's been quite some time since we've held quarterly result calls and I do indeed welcome you all and appreciate your interest and support. We've decided to change our Investor Relations policy because a combination of developments in the marketplace convinced us that more transparency would be beneficial to the firm and all of its constituents.

The first of these developments, we're nearing the end of a four-year period during which we explored the viability of a dozen different opportunities relating to our core enterprise analytics business. We have invested a great deal of time to understand and to appreciate the implications of cloud, social, mobile and other technologies in our core business and have developed and piloted many different offerings.

The second driving factor is, we've focused our business activities on two enterprise software platforms, Analytics and Identity. And we've developed a much better understanding of how to incorporate the cloud and mobile capabilities in the marketplace into those two platforms.

The third driver for our change in Investor Relations, we've divested or discontinued our interest in voice, consumer and social apps and services and that's given us a greater degree of clarity with regard to our going forward-business model.

And the fourth driver of our change in policy, the tempo of the marketplace and the opportunities in the capital markets have both increased over the past few years. And our investors have pointed out that the Company's prospects would benefit from more communication like these. Taking into account all of these forward drivers, we thought that this was the right time for us to re-institute quarterly conference calls and begin to communicate more directly with the Street.

Moving on to the state of the business. 2014 is a transition year for our firm and we're working to complete a major upgrade of our analytics platform as well as to commercialize our enterprise identity platform. There were a number of bright spots in Q2, but I can't characterize it as a good quarter for the firm. Our product based revenues were up and our support renewals were strong but our overall growth rate was not what I would have liked. Our professional services revenues declined.

The combination of slow product growth, declining professional services revenues and the rapid increase in corporate expenses caught us a bit by surprise and resulted in a loss for the quarter. This is disappointing and it's unacceptable over the long term so we'll be taking decisive action to trim cost and to return the Company to profitability as soon as possible. I expect we'll recruit a new senior executive leadership team in sales and services, as well as strengthen our budgetary controls.

Looking forward, I expect we'll deliver strong product improvements in the analytics platform toward the end of the year and I also expect we'll reach a GA version of our identity platform in the fourth quarter. However, it's unclear that either of these will have a material impact on our revenue or profitability in the next six months. Both should benefit us materially in the 2015 calendar year.

For the remainder of 2014, our focus will be on sales execution, new marketing programs to exploit our cloud and mobile offerings, and improvements in our professional services operations as well as corporate cost controls. Next, I'd like to turn it over to Paul to discuss some of our business and customer highlights in the analytics space.

Thanks, Mike, and thanks everyone for being on the call. As we look at and manage the performance of the business overall in this quarter, we principally evaluate and focus on three areas: product revenue, software support revenue and professional services revenue.

On the product revenue side, which includes our on-premise sales of perpetual licenses and subscription to our cloud services business, our business grew 6% year-over-year to $35.3 million. We believe that this number reflects continued interest in the products and software as demonstrated by the fact we recorded growth year-over-year.

However, as Mike pointed out, we also believe that with the compelling solutions we have in the marketplace we believe that we can do even better and we expect to do so. In order for us to continue to accelerate the growth in this line of business, we're focused on three main initiatives.

One is improving the market awareness and understanding the power of our solution. Industry analysts are giving MicroStrategy very high marks on the capability of its solution. However, right now we don't believe that the market awareness is yet equal to the value these subjective analysts see in our solution. As a result, we believe that better focus on educating the market about the solution will pay dividends.

This is why after an extensive search we recently hired Marcus Starke as CMO at MicroStrategy. He comes to us after two decades of marketing and advertising excellence, most recently at SAP where he was the Senior Vice President of Global Field Marketing. Marcus has already attracted and brought on board several additional executives and we believe that this new team is going to be an accelerant on driving forward the market awareness.

The second opportunity that we see to continue to grow the product license line is building strategic partnerships with key eco system companies who support our mission. This is an area where we're also seeing dividends.

We recently announced our strategic partnership with Amazon at AWS where they are publicly aligning themselves with us, and us them, to bring the promise of low cost, high availability access to MicroStrategy via the market leading cloud provider. Amazon was a keynote presenter at our recently completed MicroStrategy world conference and explained the strategic importance that MicroStrategy has to their mission going forward.

Third, we are vigorously focused on sales execution. This is a combination of bringing in the additional sales executives and leadership that Mike spoke to, and also managing the business with a very strict performance culture commensurate with the goals, financial goals, that Mike just oversaw.

On the software support revenue side we grew the revenue by 9% year-over-year to $74.6 million. We see that as a healthy number, evidencing the strong value that our existing customers see in our offering. It also demonstrates the very high support renewal rates we have and a strong foundation of support revenues from which we'll be able to continue to grow the business and revenue going forward.

On the professional services side we saw a decline in revenue of $4.1 million, or 11%. Some of the decline was expected by us as we continue to build the capabilities of our partner ecosystem and see more of our partners take on more work for our customers. However, we also believe that this is an area where we can improve our results as well.

To that end, the previous EVP of Professional Services is no longer with MicroStrategy and we are very close to announcing a new leader that we know will bring industry best practices to our services business. We're very excited to see our partner eco system grow around our product offerings. We also believe the new leadership we'll be bringing on board is going to continue to drive forward our services revenue as well as enabling the partner community.

Looking forward into the remainder of 2014 into 2015, we see ourselves as very well positioned for the key trends in the marketplace. Our mobile product is universally regarded as a leading solution and has been a key differentiator in our business and many of our sales cycles already.

We see this differentiator growing as more and more organizations see the enormous value of mobile technologies and adopt the mobile aide and we are now several years in the development and deployment cycle of our mobile technology and our investment ahead of others has now firmly positioned us as a leading product as this market adoption continues to accelerate. So we're very excited about what mobile and our mobile investments will pay for us going forward.

MicroStrategy has also been very aggressively investing in cloud. Again, we did this before many in the market saw the true potential for cloud with regard to enterprise analytics. Yet today we're exactly where we need to be. We have a mature cloud offering and with the investments that we put in place we've got a growing cloud adoption. And we see the market as moving substantially towards cloud, not simply as an alternative to deployments on prem but an entirely new way to power distribution of enterprise analytics.

Lastly, we're very well positioned to be the leader in the deployment of agile enterprise analytics. MicroStrategy is able to provide the market with the best really of two worlds, engaging, easy to deploy, fast self service analytics as well as enterprise-grade governance and administration. Gartner is referring to this as governed data discovery and predicts that this will be the major driver for enterprise analytics in 2015.

So as we look to 2015, we see ourselves as very well positioned to benefit from this trend as well. We will be able to enable business users to deploy information quickly, but to do it without sacrificing the views of data across heterogeneous data stores and take advantage of an enterprise architecture and shared metadata.

With that I'd like to pass the floor over to Jonathan Kline, who will review MicroStrategy's Usher business.

Thank you, Paul. The end of Q2 marked a major milestone for us with the beta release of our Usher mobile identity platform. The culmination of more than three years of R&D, this release is designed to enable organizations to quickly create, deploy and manage mobile identity networks. Usher synchronizes with widely used ID directories, provides peer-to-peer validation, enables password-less log-in to applications and computers.

We're more enthusiastic than ever about the mobile identity business. With the rise of big data analytics, cloud and mobility, corporations are gathering an increasing amount of data about their customers and storing that information for longer periods of time. At the same time, they're providing their increasingly mobile employees and customers with remote access to their data and networks. Cyber security has therefore become vital to an organization's economic prosperity and reputation and it's become a CEO and Board of Director level priority for corporations.

We believe that there are significant barriers to entry to building a successful enterprise-class identity platform. You need to understand big data, cloud, mobile and security. You need to be an established Company, ideally publicly traded with international operations, with a successful track record of meeting the enterprise requirements of global 2000 and government customers. And you need to have a strong balance sheet and powerful alliance partners. We believe we have strong assets in each of these areas.

We're also working with some of the world's leading financial institutions, insurance companies, retailers, universities, and government clients to pilot Usher during this beta period. And major partners such as Northrup Grumman, Tata Consultancy Services, T-Systems and AT&T are enthusiastic about going to market with us.

We plan to continually improve and refine the product during the beta cycle with a goal of issuing a GA release toward the end of 2014. We hope to begin generating material revenues with Usher in 2015.

I'd now like to turn it back to Doug to discuss our financial results for the quarter.

Thank you, Jonathan. Since I assume that you've all seen the press release from earlier today, as well as some things mentioned earlier in this call, so I thought it was best just simply make some highlights and observations from my perspective on the current quarter results.

So as we know, our total revenue increased by $4 million, or 3%, over the prior-year quarter. While the growth number that we -- that was not the growth number we were looking for, for the quarter, we shouldn't lose sight that within this result is an 8% growth when you combine the product license, subscription services and product support revenues together versus the prior quarter.

Our product license revenue of $29.4 million, so you have a break out between domestic and international, it was approximately 56% domestic with six deals closed that were $500,000, and approximately 44% international with three deals that were $500,000.

Furthermore, I should note that the large increase in subscription services revenue over the prior quarters was helped by a one-time recognition of approximately $1 million from a previously deferred deal due to certain contractual commitments that we met in the current quarter.

But overall, the growth in this area is still very healthy as we add more customers to the offering. Negatively impacting the growth was our services revenue, which declined by 11% over the prior-year quarter and it is an area that we believe needs some renewed management attention, as mentioned by Paul earlier.

While our total revenue grew by 3% overall, our operating costs increased by 15%, pushing us into an operating loss for the quarter of $12.7 million. These cost increases were concentrated in both sales and marketing expense, which grew 16%, and R&D expense, which grew 32%. Both of these expense increases were mainly attributable to the headcount growth in those areas.

You can refer to the chart on the headcounts in the attachment to the press release for further details on headcounts. Note that during the current quarter our R&D efforts were allocated approximately 70% to our analytics platform, mobile, cloud, and other internal initiatives, and 30% to our projects, including loyalty and identity platforms. Finally, general and administrative costs did decline 5% from the prior-year quarter, reflecting a reduction in headcount in this area.

As many of you know, we have been aggressively adding to our resources over the last few years. However, we realized that we may have grown our resources faster than was appropriate and therefore we recognized a need to trim back in areas where we were not operating in an efficient manner.

We take profitability seriously and to this end we are currently in the process of finalizing a plan that is expected to result in annual pre-tax cost reductions of at least $40 million, mainly through headcount reductions. The final cost reduction number will reflect our deliberate effort to reduce areas of inefficiency.

Candidly, I do not like to see operating losses and this cost reduction effort is one that I'm personally going to drive and be accountable for. We have a long history of profitability here at MicroStrategy and we will work diligently to return ourselves to profitability in 2015.

In closing, I will highlight that our balance sheet continues to reflect a solid financial foundation for us. We have cash and short-term investments totaling $367.5 million at the end of the second quarter of 2014 and we continue to have no debt. Our year-to-date operating cash flow was $14.4 million, reflecting strong collection activities, reducing our accounts receivable days outstanding to 37 for the second quarter of 2014 from 48 days in the second quarter of 2013.

Additionally, our total gross deferred revenue balance at the end of the second quarter of 2014 totaled $212.5 million, compared to $195.5 million at the end of the second quarter of 2013, representing a 9% increase.

In addition to these amounts, we also have additional future minimum commitments by our customers to purchase our goods and services of $123 million, as compared to $111.4 million as of the end of second quarter of 2013, representing a 10% increase.

Overall, I remain very enthusiastic and confident about our place in the market and our future prospects. Now I'd like to turn it back to Michael for some concluding remarks.

Thanks, Doug. When we think about 2014, I truly consider it a transition year for us. We've been working on significant innovations, especially over the past few years, and I believe these investments will position us for the long term.

As mentioned earlier in this call, we believe we're well positioned to take advantage of major opportunities we see in analytics including mobile and cloud and capitalize on increasing demand for a solution to the enormous problem of cyber security. For the remainder of the year our focus will be on execution.

And with that, I'd like to take questions from the analysts. Thank you.

(Operator Instructions). Our first question comes from Karl Keirstead with Deutsche Bank. Your line is open.

Thank you. Michael, Paul, Jonathan and Doug, I wanted to start by just thanking all of you for the change in posture about communicating with the Street and the level of transparency in general. It makes a huge difference for everybody on the line. So thank you.

I've got a couple of questions and I thought I'd start with a question about margins and profitability. The $40 million restructuring plan, certainly a major step in the right direction. But it's coming off such a historically high cost base that it's still tough for outside analysts to estimate what a normalized margin structure should look like for MicroStrategy in 2015 and beyond.

I realize you're not here to give specific guidance but as we all collectively try to gauge whether an eventual return to, let's say, 20% margins is even realistic. Michael, I was hoping you might just take a minute to lay out your broader thinking and goals about margins going forward. Thank you.

I think that our general thought is we want to be in the black in 2015. I think if we look out 12 months to 24 months, we'd like to be running a business with a 10% operating margin. And I think that whether or not the operating margins are better than that is really a function of the growth rate of the Company.

And if we were running -- I think if you're running a low-growth company, I think that 10% is kind of the minimum you can target and of course healthier would be higher. I think if you're running a higher-growth operation and we see opportunities to expand more rapidly, we might accept a lower margin target. And I think we'll have a clearer answer to that question when we look -- when we wait 12 months and we see how all of our new product initiatives have evolved.

That's helpful. If I could ask a couple more. Michael, you also mentioned in your opening comments that you weren't satisfied with the core product license growth. I think if we strip out subscriptions it was down 4%.

I'm just curious if you could offer a little bit of color about that core on-prem analytics business. Do you think it came in a little bit below competitions because of a tough macro environment? We certainly heard that from some others. Or do you think it was a little more MicroStrategy specific and hence it can be corrected with the kind of changes you offered on the call?

I'll give you my opinion, Karl, and then Paul may have commentary. We've had an open spot for a Head of Worldwide Sales for more than a year. And I think that, that's a vacuum, a management vacuum, we need to fill and I think the result of that is it undermines our ability to execute in sales.

I think that Paul's done a pretty good job of stepping in and filling that hole. But we need to add a couple more senior sales executives and we need to tighten our sales execution. And if we were doing that, I think we'd see better year-over-year performance on the sales side. Paul?

Yes, I mean, I echo that as well, in enthusiastically working to try to work and bring forward that team. I think we're doing the same as well on the marketing and on the services side as well.

On the macro economy, Karl, I think there's a lot of confusion in certain parts of the world outside the US. And on the other hand I think the US market macro economy is pretty strong. So I wouldn't pin any of our challenges in execution on the macro environment, although certainly you can focus on the wrong places and it would be more or less an impact on you.

I think generally the big picture is, strategically we think that we need to drive our product revenues and the best way to do it is improvements in sales and marketing executives and we're making those as fast as we can. I think on the services side, although it's not essential that the Company build a huge professional services business, I do think that it's important for us to improve professional services because it's the gateway for us to drive the cloud business.

And also there's just no reason that an enterprise software company shouldn't have a healthy professional services business specializing in technical guidance to its installed base. And I think that, that's always just an execution issue. Our view is, right now we need to execute better and the right way for us to do it is a combination of changes in systems and procedures internally as well as bringing in some new talent.

I'll ask one more and I'll go back into the queue. I think everybody on the line, Michael and Paul in particular, are well aware of the tremendous growth of Tableau and some of these pure plays on self service analytics. It doesn't seem that many of your rivals among the larger BI players have had much success coming out with competitive products in that area, and I think everyone on the line would love to hear what you have coming.

I think there's a little buzz around an upgraded self service analytics product coming out by the end of the year. Perhaps you could address that, just given that it's got a lot of attention over the last few years.

Karl, this is Paul. So first, thanks, I think a great question. I think the market is crystallizing around what all of this is going to look like.

We do feel very, very confident in really the long-term vision for what MicroStrategy has in store, not just across enterprise analytics but really this idea of visual data discovery or self service analytics, which I think is represented by Tableau and some of the other companies.

What we believe very, very strongly, and I just breezed over it earlier, we believe very strongly, and Gartner has highlighted this very specifically in their most recent industry report, is that the dominant player long-term is going to be the company that cracks the code on what's generally referred to as governed data discovery. That's their term, not ours, but quite frankly it's very empowering for us because it's exactly the vision that we have for the business.

We believe very strongly that the long-term solution is going to marry the enterprise grade governance and administration that we bring but to the agility -- the agility to be able to deploy and have those analytics deployed and managed more easily and directly by business users. So we are very, very optimistic and very excited about not only where the product is today, but where we expect to take the product going forward. And so the buzz that you're hearing we think is appropriate and we think that this is a story for which it's not fully been written and feel very good about how we're positioned.

Terrific. Thank you, gentlemen and I'll pass the baton to my colleagues.

Great. Thanks, Karl.

Our next question comes from Greg McDowell with JMP Securities. Your line is open.

Great. Thank you very much. Hi, gentlemen, and thank you for hosting the call.

You're currently delivering your analytics platform both on-premise and in the cloud and I heard you say you see the market as moving substantially to the cloud. Can you talk a little bit about the potential cannibalization of your current on-premise revenue base and potentially the financial impact to the model of that move-over to the cloud?

Why don't I let Paul start and I'll have a few comments when he's done.

Thanks, Mike. We don't view cloud really as a cannibalization. Customers are -- we see as seeing cloud as an opportunity to expand the addressable market.

This market is all about the democratization of data and information. If you look at where companies have really struggled with analytics, it's because it's been too difficult in some instances to deploy it with the expertise that they have in house.

So we see cloud -- maybe there will be a little bit of overlap as people start to determine which works best in particular instances. But there's no doubt in our mind, and I think many peoples' minds, that cloud is going to be a long-term player in really expanding the addressable market for enterprise and enterprise analytics. And that's why you see us so aggressively promoting the relationship, for instance, that we've just struck with Amazon's AWS offering.

We see that as both complementary to what we're doing and really supporting the overall growth and expansion of the business to a number of different geographies and business units that might otherwise find it difficult to build and stand up in enterprise on-prem deployment.

And I would add that when you're selling on-premise software, you're generally selling it to a global 2000 company with a very well-established IT department, established data centers, a very well-established mission and requirement to run software in-house, either for legal reasons or for contractual reasons. And those organizations have been working at it for a decade or two decades. Generally, they don't just turn 90 degrees in 12 months or 24 months.

And they have a pretty good reason to keep buying on-premises software and keep maintaining it. There's a great deal of asset investment there.

There are two new constituencies that we acquired by having a strong cloud offering. One constituency would be departmental executives and line of business executives who have additional requirements that they feel can't be met in a timely fashion or in an economic fashion by their in-house IT organizations and they want to do something which is outsourced. And that's totally new business for us.

The second class of customer for the cloud are organizations that don't have IT departments at all. It's possible to have millions of members of your union or millions of customers or tens of thousands of employees but not have a sophisticated, expensive, well-financed IT organization.

And then the third class of customers you hit with the cloud would be small, mid-sized operations, enterprises that they have a small IT organization but they don't have the data center scale or the global scale or the technical capability to do the kind of things that they could do if they partnered with us and a large cloud operator like an Amazon.

So we see cloud primarily as an opportunity. That's the good news. The bad news is, it all is new business with new types of customers. And so for that reason, we don't stay up at night worrying that all of our existing customers will switch to the cloud. We actually spend our time trying to keep our existing customers happy and then we go find these new constituencies and we bring them into our customer orbit.

That's helpful. Thank you very much. One quick follow-up.

Can you discuss the new packaging and licensing that was announced at MicroStrategy World in Barcelona? It seems like a pretty significant change for the Company and I was just wondering if you could walk through what brought about the change and what you're seeing so far in terms of customer reaction to the change?

Great, Greg, this is Paul. Thanks for highlighting it because it is something that we think is important.

What brought about the change? Really, customer feedback. The customers told us that it would make it easier for them to more widely deploy MicroStrategy if we simplified the offering.

And to Mike's point, one of the predominant reasons why you need to simplify the offering is in the current environment many, many business users are involved in decision making now. So to the extent that we can simplify the offerings, that it's easy to be understood by and consumed by business constituents who are participating the decision, that, we think's going to do nothing but give us a greater audience for the -- for our packaging going forward.

Great. Thank you.

Our next question comes from James Gilman with Drexel Hamilton. Your line is open.

Thank you. Good evening, folks. I have a couple questions. I'm going to ask what I think maybe is the more simple question, or the simpler question, that is around the mobile identity management.

I think -- view identity management as an insurance policy, just like people enterprises would like to have, but not necessarily like to pay for it. So if you could comment on that it would be great.

But I want to go ahead and ask the second question which I think is the more important one. It's around, let's say, the long-term strategy. I know the question was asked earlier around the self discovery or the BI, self-service BI, and you mentioned the governed data discovery.

In reference to the governed data discovery, I would think that would be, need to have an additional products would be R&D intensive. It might take time to roll that out. In the meantime, you might be missing out on that opportunity that Tableau and Quick Tech are capitalizing on.

If you could comment on those two, that would be great. Thank you.

So just so I understand you, the first question is, is how does the enterprise value identity? Is that what you're getting at? How are the enterprises going to view mobile identity?

Correct. Yes.

Okay. Well, right now, as far as we can see, the need for multi-factor authentication and better cyber security techniques has emerged from an interesting, nice to have five years ago or maybe a technical thing to becoming pretty essential part of anybody's portfolio.

So I don't think there's any global 2000 company where you can't get a meeting to talk to the CIO or talk to the CISO if you start with the elevator pitch that we've got a better way to secure your enterprise than traditional passwords or traditional security tokens. They all want to talk about that.

And in terms of value, I would think that any organization that's got north of 10,000 employees would have value north of $1 million a year to find a better way to secure that enterprise. So there are a lot of ways to get at how big the market is or how valued it is for a given enterprise. But it's pretty clear that it's a multi-billion dollar marketplace out there to be had if you can actually show people you've got a better approach.

The nice thing about the world today is that the current approach, 95% of the time's a password. So they all know that a better approach is going to involve mobile software running on a smartphone that does something with strong encryption on the back end and maybe biometrics or secure -- a secure element in the phone on the front end.

Jonathan, do you have anything else to add on that?

One other way to look at the market is that there's estimated to be $300 billion of loss to cyber crime this coming year, so that puts a framework around the amount that's at stake. I think the President of the United States recently gave a speech, said that cyber security's going to be the defining issue of the 21st century. We think there's a big opportunity here.

Data breaches have caused CEOs to lose their jobs and it's become a Board of Director-level issue. We see a huge opportunity and everyone we're talking to has an interest in solving this problem and no one's cracked the code previously. It hasn't been possible prior to the wide-scale deployment of mobile smartphone technology which has really happened and crossed a certain threshold in the last 18 months to 24 months.

Moving on to your second question about governed data discovery and self service. I think the one point that I would make here is we have a very rich, sophisticated enterprise architecture that's developed over 20 years. And it's not just an architecture to make more sophisticated reports or build more sophisticated metrics against a complicated structure database.

We also have a very rich security architecture and object sharing model and metadata model. And because we have all those things, we have a latent opportunity that we can realize as we start to create better visualizations and give people better windows into that rich security model and that rich metadata model. We can provide much more power to the casual user, the analyst, the end user or the power user. So we see improvements in visualization on the desktop and visualization in the web and visualization in the mobile device as a trend which is very auspicious for us.

And it's a lot -- if you have a sophisticated and powerful architecture that has been under-leveraged, it's a lot easier to improve the interface and leverage it than it is to take a simplistic architecture without security, object orientation or the proper meta sharing and then to build that. We're starting from the high ground and we're doing our best to take advantage of best practice on the client side and we're also inspired and we're learning from the successes of the Tableaus.

We are not at all unaware that they've got an exciting experience for the analyst. Our view is, we're going to be inspired by that. We're going to provide similar exciting experiences for the analyst but we're going to plug it into an industrial strength enterprise architecture that provides security, distribution, scalability, elasticity and sophistication and robustness.

So I think that's it. Any other questions?

No, thank you, Michael and Jonathan.

Okay.

Thanks.

Our next question comes from Frank Sparacino with First Analysis. Your line is open.

Hi, guys. Two questions. I wanted to go back to the comments earlier about driving product growth and the new packaging and get your feedback on if you're leaving money on the table in the short term with the new packaging scheme? And how do you further monetize the installed base on the analytics side?

Hey, Frank, I don't think any of us are of the opinion that we're going to leave money on the table with a simpler packaging scheme. We brought together a set of sophisticated tools. But a lot of them were very low volume analyst tools where it's just as likely someone buys three of them and doesn't buy the other seven as it is that they buy them all.

And so by putting the offering together in bundles that make sense for the end user, I think it's a chance for us to get our technology in the hands of developers. And those developers build more applications and drive more demand and we lower the impedance of the sales cycle.

So we're expecting better sales efficiency, more coverage and more deployment of intellectual property that requires MicroStrategy servers. What was the second part of the question?

Second, just on the -- you're sitting on a record amount of cash today and given the sort of R&D makeup and the way you guys operate, I'm just wondering how do you effectively put that money to good work?

We're thinking about it all the time and we like to keep our options open so that we can be opportunistic if we see a particularly good thing come along. We also believe that it's helpful for us to be in a position to do share buybacks, should the market represent an interesting proposition there.

And finally, I think we like to have a strong balance sheet because when we're in negotiations with counter parties, especially in the emerging enterprise security space and enterprise identity space, it's comforting for them to see that we're actually going to be around for the long term.

So it's a sales and marketing tool. It gives us the ability to pursue strategic deals should we see them, and we're ready to buy up the stock if we feel it's undervalued. That's how we use our balance sheet. We're open minded toward all those things and we're thinking about it all the time.

And Mike, just if I could, I just want to clarify a follow-up on one of the comments you made. I mean, historically you guys have never done an acquisition. Do I interpret from your comments there that you're more open to acquiring technology, or not?

I think we're open to doing whatever's in the best interest of the shareholders and the best interest of the Company. We don't think of ourselves primarily as a Company that grows via acquisitions but I think that having a strong balance sheet and having cash on the balance sheet makes it possible to enter into strategic deals as we see those opportunities and I think it's never a bad idea in business to have opportunities.

Thank you.

Next question comes from Greg McDowell with JMP Securities. Your line is open.

Thank you. Just one quick follow-up. I think hosting the earnings call is a great first step. But any sense on what we could expect going forward as far as an Investor Relations program is concerned?

That's currently a work in progress. I think we're expecting that we're going to reach out more to investors.

We did do a road show early this year, so I suspect that certainly at least once or twice a year we'll do a road show to go visit investors. We're looking at investor conferences or good tech conferences where we might show up and present. If you have suggestions for what you think is an ideal Investor Relations program, we're open minded toward that and we're looking for those suggestions right now.

I think in time we may appoint a new Head of Investor Relations but for now, our view is we want to have good quarterly conference calls. We want to have a good relationship with the sell-side analysts. We want to look for efficient ways to get out and brief the market on a semiannual basis or so.

Great. Thank you.

Next question comes from Karl Keirstead with Deutsche Bank. Your line is open. Karl Keirstead, please check your mute button. Your line is open.

Pardon me. I was muted. Sorry about that. One follow-up from me to Michael.

Mobile's a topic near and dear to your heart, I think due in large part to your early push years ago. MicroStrategy struck out ahead of the pack on the mobile BI front. I'm sure you have a view on this IBM/Apple announcement made a few days ago.

How do you -- IBM's talking about pushing analytics and BI onto mobile. What's your take on that and the competitiveness vis-a-vis what MicroStrategy already has in the mobile BI space?

I think starting around 2009 it was pretty clear that IOS and multi-touch was going to be an emerging operating system and not just a fad. We released our first product in 2010. But candidly, we had some frustration because it seemed quite obvious then that everybody should be stampeding on what we saw were a number of enterprises waiting to see what Microsoft would ship and what BlackBerry would ship and whether or not Apple would be successful in the enterprise and that caused people to wait for two or three years.

And I think the market unthawed pretty dramatically about a year ago, around 2013, at the point that Steve Ballmer stepped down at Microsoft. You saw, between the Microsoft moves and the BlackBerry moves, a meltdown in the market and then all of a sudden a lurch forward. And it became pretty clear to everybody in the world that the mobile market was going to be IOS and Android.

And you even see that clearer today, if you look in the last month with all the Microsoft layoffs that they say are targeting very heavily at Nokia. If anything, what you've got is the enterprise embracing mobile. IBM's decision to tie in with Apple is really, to my mind, a huge endorsement of the transition to mobile and the explosion of mobile application demand in the enterprise.

And it means that the bluest of blue chips is going out and telling the most conservative, traditionally the IBM customers were the most conservative customers. And IBM was the most legitimate and bluest of the blue chip providers. You've got a very conservative enterprise technology company going to very conservative customers endorsing Apple computer.

And the result of that is, I think just about everybody in the world, right, unless you've been hiding under a rock, has to ask themselves the question, what mobile applications haven't I built that I need to build and how do I make myself more efficient? As it turns out, this is going to result in an acceleration in the wave of remediation of mobile apps and a massive increase in demand.

Apple doesn't provide anything competitive to us and IBM doesn't really offer a competitive suite of mobile technology the way we do. If anything, I would expect that this is going to lift all the boats in the marketplace like a rising tide. I think that anybody that's got a very strong mobile offering is going to have their phone ringing and we've had an offering which has consistently ranked at the top, if not the number one in the marketplace.

So I think it's an auspicious development and really a good thing. I think it's also emblematic of IBM throwing in the towel, in a way. Just like Microsoft, in a way, shipping Microsoft Office on the Apple is kind of throwing in the towel.

When you see IBM and Microsoft both jumping behind the Apple ecosystem, the interesting question is just how does this play versus Google, more than anything else. It's kind of like is the weight coming down on the Apple side versus Google? I think for everybody else in the market, I think we're all cheering for it and it's going to result in new opportunities opening up for all of us.

Okay. Really appreciate the color.

Thank you. This ends our Q&A for today. I'll turn it back to Management for closing remarks.

I want to thank everybody for being on the call and we'll look forward to seeing you again in 12 weeks. For now, we're back to work. Thank you.

Ladies and gentlemen, thank you for participating in today's program. This concludes the program. You may all disconnect.