Andy on Enterprise Software

Microstrategy catches a cold

July 31, 2006

The latest financial results from Microstrategy show it joining the lengthening list of BI vendors that are struggling.  Cognos has at least shaken off its SEC troubles, but it has had mixed results at best recently, while Business Objects recent share price chart has that 1930s Great Depression look about it (see below)   Microstrategy showed a 5% decline in licence revenue, both year over year and on a trailing 12 month basis.  While total revenue increased due to a spurt in services revenue, no software company can honestly say that they are happy if their lifeblood, software licence revenue, is in decline.  The company’s profits were down but operating margins were still a very healthy 32%, albeit again declining from a year ago.

I believe that this latest addition to the casualty list is continued supporting evidence for my long-standing thesis that pure BI players are going to struggle in the medium term due to the steady encroachment of Microsoft with its cheap and cheerful competing BI technologies, and also to the largely unrecognised saturation of the high end enterprise market for BI tools. 

It can be seen below that Microstrategy’s share price has held up better than its main rivals recently, but this latest set of results has triggered a sell-off.

(source for graphs: Yahoo finance web site)

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