Author: Ben Weiss, DL News; Translated by: Tong Deng, Jinse Finance
MicroStrategy wants investors to know it is hoarding Bitcoin.
MicroStrategy announced that the title of its Q1 earnings report is: "Currently holding 214,400 Bitcoins."
In the second quarter, its announcement was: "Currently holding 226,500 Bitcoins."
And the company's founder and chairman, Michael Saylor, seems to do little on X other than fawning over the world's largest cryptocurrency.
"Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth," reads the featured post on his X personal profile.
But MicroStrategy is not just buying Bitcoin. It has 1,637 employees.
Executive Vice President and Chief Product Officer Saurabh Abhyankar said that the vast majority of these employees are engaged in the company's data analytics products.
Yes, MicroStrategy's Bitcoin buying frenzy has attracted headlines - especially as the world's largest cryptocurrency hit new highs and broke through $100,000.
As Bitcoin prices soared, so did MicroStrategy's stock price.
The company's Nasdaq-listed stock is up more than 450% this year, outpacing Bitcoin's 135% gain.
But even as the Bitcoin craze rages, MicroStrategy's employees are still developing low-profile software for companies like hotel operator Hilton, furniture retailer Crate & Barrel, and airline Emirates.
Abhyankar said MicroStrategy's software products are the core of its business - and part of the daily lives of many people in the U.S. and elsewhere.
"You may already be using MicroStrategy," he said, "because you're interacting with some big banks and big retailers."
Who does MicroStrategy serve?
MicroStrategy's flagship product, MicroStrategy ONE, is not aimed at everyday users like Uber or Google Search.
Its enterprise software runs behind the scenes at large companies.
Abhyankar said, using retailers as an example:
"Store managers have a lot of things to do to run their business."
This includes data on store inventory, employee scheduling, and expected deliveries. This data, and the software to categorize it, is often siloed.
In other words, the calendar used to manage employees is a different program from the one used to track store inventory.
But for large enterprises, it's more efficient for managers and executives to view all this through one platform.
"Fundamentally, our platform can connect data from all these different systems," Abhyankar said.
And because each company's software and data suite is different - Hilton and Crate & Barrel are not the same company - MicroStrategy's software needs to be flexible.
"Banks, retailers, hospitals, pharmaceutical companies, and so on - a lot of their business leverages MicroStrategy to operate," Abhyankar added.
Current customers include a wide range of companies: Pfizer, the U.S. Postal Service, and even fried chicken giant KFC.
Initial Public Offering
However, investors did not rush to buy MicroStrategy stock at over $370 because they were excited about the company's ability to help hospitals operate more efficiently.
MicroStrategy went public in 1998. But in 2020, when Saylor announced his company had purchased about 21,454 Bitcoins for around $250 million, MicroStrategy attracted a new set of investors.
In a press release, he said: "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."
According to Bernstein analysts, MicroStrategy's Bitcoin financial strategy is: Use the excess cash from the software business to buy Bitcoin. Buy Bitcoin by issuing stock or bonds. As Bitcoin prices (hopefully) rise, the value of MicroStrategy's holdings will rise, boosting MicroStrategy's stock price.
Since 2020, the company has amassed over 402,100 Bitcoins, worth around $40 billion.
A Proxy for Bitcoin
MicroStrategy's stock price has moved in sync with Bitcoin's price, especially this year as the company has poured more and more corporate resources into the cryptocurrency.
Investors often view crypto stocks as a proxy for Bitcoin - a simple, cheap way to lock in Bitcoin gains without directly engaging with the crypto markets.
In fact, Wall Street analysts advising institutional clients have barely mentioned the software business.
On Wednesday, Bernstein even saw the software division as a potential obstacle to MicroStrategy being included in the benchmark S&P 500 index.
Bloomberg Intelligence analyst James Seyffart shared the same view, arguing that the company's "lack of profitability" is a barrier to inclusion in the S&P 500.
Bernstein expects MicroStrategy to continue heavily investing in Bitcoin, driving its stock to surge to $600 in the next 12 months.
Abandoning the Software Business?
MicroStrategy's fervent focus on the world's largest cryptocurrency raises the question: Is its software business withering away?
From 2020 to 2024, quarterly software sales have stagnated between $110 million and $135 million.
From the end of 2020 to Q3 2024, MicroStrategy's headcount has declined by 22%.
Abhyankar declined to say whether MicroStrategy is preparing to become a pure Bitcoin investment fund. "My goal is to grow the analytics business," he said.
Instead, he said he believes the company's focus on Bitcoin complements its software business.
He argued that MicroStrategy's soaring stock price helps attract and retain software talent, while its Bitcoin-centric balance sheet reduces the need for its analytics business to chase short-term profits at the expense of long-term gains.
He said investors typically measure software providers by increasing quarterly revenue and clients. However, MicroStrategy's Bitcoin balance sheet has added another metric for analysts to assess the company.
"My goal is to grow the analytics business," said Saurabh Abhyankar.
"Our Bitcoin strategy has eased that pressure, so we can take a long-term approach to executing our engineering investments and innovation strategy," Abhyankar said.
Ultimately, he knows MicroStrategy's data analytics business won't make headlines. But Abhyankar assures that the majority of the company's 1,637 employees are doing other things, not just hoarding Bitcoin for Michael Saylor.
"We may just be a small part of MicroStrategy," Abhyankar said, referring to the software business's prominence on the company's balance sheet. "But we're still an important part."
