Business Intelligence company MicroStrategy was recently in the news when Micheal Saylor, the Chief Executive Officer, stepped down from his post to assume the new role of Executive Chairman. Saylor has been replaced by Phong Le, the company president.
Founded in 1989, MicroStrategy is a public company headquartered in Washington. Its primary business is providing business intelligence and cloud-based services. It competes with the likes of SAP, IBM, and Oracle’s business intelligence platform. In an earlier interview with Analytics India Magazine, Saylor said that he wants to make MicroStrategy the ‘Ferrari of BI landscape.’
In 2020, MicroStrategy invested USD 250 million (all of its planned inflation-hedging funds) in Bitcoin as a treasury reserve asset. The company purchased 21,454 bitcoins. As of July 2022, MicroStrategy holds approximately 129,699 Bitcoin bought at USD 30,665 each on an average—taking the aggregate purchase price to close to USD 4 billion.
MicroStrategy’s BI business
While delivering the opening keynote at the MicroStrategy World 2022, the company spoke about a new strategy for thinking about analytics and business intelligence. CEO Le said that the new way of thinking about analytics and business intelligence is by enabling developers with tools to build applications, further commenting, “These organisations understand that the key to unlocking their data is to empower their developers.”
To realise this, the company is introducing several transitions. Firstly, MicroStrategy is evolving from dashboards to business applications for analytics-based applications. Towards this, MicroStrategy has introduced SDK Embedding Playground, MicroStrategy Library, and new application features in Workstation.
Further, the company is embedding analytics applications in business processes. In 2019, the company introduced ‘HyperIntelligence’, an augmented intelligence and machine learning based zero click embedded analytics system.
MicroStrategy is adopting a horizontal approach to analytics—meaning, they house different applications integrated with each other unlike the vertical approach where all the capabilities are housed in a single environment. This helps in obtaining real-time insights and action.
Focus on Bitcoins
Despite having a stronghold in the business intelligence industry for decades, in at least the last two years, MicroStrategy has largely been in the limelight for its Bitcoin adventures. As mentioned earlier, MicroStrategy invested USD 250 million in Bitcoin in 2020. At that time, the company said that cryptocurrency provides a reasonable hedge against inflation. The then CEO Saylor told CoinDesk, “This investment reflects our belief that bitcoin, as the world’s most widely adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.”
Saylor further reasoned that things like the pandemic, political and economic uncertainty, and global quantitative easing measures are weakening flat currencies, which also works in the favour of Bitcoin in terms of reliability.
In two years, Bitcoin suffered 59%, spelling major troubles for companies like MicroStrategy. As per a Bloomberg report, MicroStrategy and Tesla—two companies that placed major bets on Bitcoin—suffered a combined loss of USD 5 billion in the second quarter of 2022. Of the two companies, MicroStrategy was deemed the bigger loser, with an estimated loss of USD 3.4 billion.
Interestingly, just a month earlier—on June 28—the company had added 480 Bitcoin despite the bear market. BTC had been performing poorly, with its value dipping below $22,000 for nearly two weeks. At that time, the company made this purchase for USD 10 million at an average price of USD 20,817, including fees and expenses. With this purchase, MicroStrategy held USD 129,699 BTC.
While Tesla learnt its lesson well in time and sold 75% of its Bitcoin holdings to raise cash with other companies following suit, MicroStrategy continued to not only hold but also add further despite Bitcoin’s cascading decline over the last few months.
According to the company’s latest earnings report, MicroStrategy took a non-cash digital asset impairment charge of USD 917.8 million in the second quarter, up from USD 170.1 million in the first quarter.
Most of these decisions can be circled back to co-founder Saylor’s fervent belief in Bitcoin. In an interview with Forbes, he called himself a ‘Bitcoin maximalist’ and referred to Bitcoin as a tool for economic development. He supports Bitcoin as a corporate investment and believes that there is regulatory agreement among the US regulators that Bitcoin is a commodity and falls under the jurisdiction of Commodity Futures Trading Commission’s jurisdiction.
From an analytics business, MicroStrategy has been turned into a ‘leverage bet’ on Bitcoin with a total debt of USD 2.7 billion. While the software business remained profitable with USD 22 million in net cash, Bitcoin put a dent in the company’s revenue—resulting in USD187.1 million of negative shareholder’s equity.
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