The specific objective of this graded written research project is to prepare an "executive level financial report" to the Chief Financial Officer (CFO) of Hyper Theory Incorporated (HTI), a mythical company in which you are employed as a senior financial analyst. This report will pertain to the financial evaluation of a real, publicly-traded, company, MicroStrategy, which will require: independent research (web-based or library), careful financial analysis, and the proper application of key financial theories and formulas.
The company that is to be analyzed for this project is MicroStrategy, a publically traded software company headquartered in Tyson Corner, VA.
Situation:
You are a financial analyst with the mythical Hyper Theory Incorporated (HTI.) HTI is an established manufacturer of a line of fully-integrated wireless communication products, which services an international market. A competitive technical and economic product evaluation has determined that MicroStrategy is the best potential candidate for a long-term software security partnership. MicroStrategy is offering a competitively favorable deal. However, based on some serious general concerns about the fallout of companies in the software industry in general, the CEO has asked your CFO to conduct a financial analysis of MicroStrategy to determine if it is prudent to commit to this company's software systems. The cost of cutting over to the new software system is significant and any interruption in support during the next few years would adversely affect HTI's performance and profit. Specifically, the question is what is the financial viability of MicroStrategy?
Research, analyze, and prepare a report for the CFO on the actual financial performance of MicroStrategy for the last three years. In addition to reviewing the traditional financial performance indicators, you are also to review MicroStrategy's past and current stock performance for the last one year.
Your report is to consist of three parts:
(1) An evaluation of MicroStrategy's financial performance for the last three years.
(2) An evaluation of MicroStrategy's stock performance for the last one year.
(3) Finally, a specific recommendation, with supporting rationale, as to whether or not MicroStrategy's recent trend in financial and stock performance is of sufficient financial strength to warrant entering into a long-term commitment.
To assist you in your task, the CFO has provided the following general guidance:
1. Since it is widely recognized that the Software industry is undergoing a major adjustment, it is very important to comparatively evaluate MicroStrategy's financial and stock performance trends against its Industry.
2. You will likely need to include all necessary and relevant financial performance and stock information, trends, and projections in supporting your recommendation. To include: financial ratio trends with industry comparatives, capital spending, stock growth, Beta values, credit rating service valuations, bond rating valuations, and management and investment reports - when and where such documents are available.