Micro Strategy has delayed making its initial public offering (IPO) until next year amid rumours that it is not in a suitable financial position to do so now.
The online analytical processing (OLAP) software supplier was understood to be going for a public listing on the Nasdaq exchange in the third quarter of this year, but now says it is more likely to go to the market next year.
One source said: ?Micro Strategy has told various prospects it?s not going to the market now. It?s burning a lot of cash, especially in Europe, but is getting little return. It?s not getting the revenues out of its existing account base, and while it?s marketing message is high end, it goes for low end sales pitches and doesn?t grow them. But, it?s not doing the volume, so I don?t know how it?s making money.?
Another source said that the company was facing problems due to over-expansion of the organisation, especially in Europe. Its cost base was also too high, while its product set was coming under criticism for failing to match up to the hype.
?The product does not scale to the large numbers claimed due to its architecture. Users create large numbers of temporary tables, which can lock the database as more users try to get on the system. This has restricted larger deployments in customers that Micro Strategy was relying on in the run-up to the IPO,? he said.
But, he added that the failure to go public may cause other problems for the organisation, ?mainly because of its highly-touted policy of hiring Stanford and MIT graduates, based on a promise of a fortune.?
But Eduardo Sanchez, Micro Strategy co-founder and vice president of Europe, was adamant that the supplier was not in financial trouble and was simply delaying its IPO due to Nasdaq?s current poor performance.
?We?re still evaluating when to go public. The stock market today is not healthy, so it?s not an optimal time to do an IPO. We will go IPO within the next 12 months and are keeping our options open, but we?re not guaranteeing it?ll be in 1997. We?ll do it when we have the right infrastructure and the conditions are better,? he said.
But he denied that the European business was facing any financial difficulties. ?We expect to make $20 million in Europe this year, but the business is built on its own revenues and there?s no cash drain from elsewhere. We?re investing heavily here, particularly in our French and German subsidiaries, but we?re re-investing profits to fund it. Headcount grew at 100 per cent last year, but revenues are growing at the same rate. As for scalability, we?ve just demonstrated 10,000 concurrent users on a several hundred gigabyte database running on a Tandem machine, so we?re not finding it a problem,? he said.
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