SEC Comment Letter for Strategy (MSTR) — Nov 8, 2006
Strategy Inc
Date: Nov. 8, 2006 · CIK: 0001050446 · Accession: 0000000000-06-054847
AI Filing Summary & Sentiment
File numbers found in text: 000-24435
Referenced dates: August 11, 2006, July 28, 2006
Letter
Room 4561 November 8, 2006 Mr. Michael J. Saylor Chairman, President and Chief Executive Officer Microstrategy Incorporated 1861 International Drive McLean, VA 22102
Re: Microstrategy Incorporated Form 10-K for the Fiscal Ye ar Ended December 31, 2005 Filed March 10, 2006 File No. 000-24435
Dear Mr. Saylor:
We have reviewed your response letter dated August 11, 2006 and have the following additional comments. We may as k you to provide us with supplemental information so we may better understand your disclosure. Please be as detailed as necessary in your explanation. After reviewing this inform ation, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about our comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Michael J. Saylor Microstrategy Incorporated November 8, 2006 Page 2
Form 10-K for the Year Ended December 31, 2005
Financial Statements
Notes to Consolidated Financial Statements
Note (2) Summary of Significant Accounting Policies, page 65
(j) Revenue Recognition, page 68
1. We note your response to prior comment number 6 from our letter dated July 28, 2006. Your response indicates that, for ne w offerings or offering that have not had a sufficient history of sales volume, VS OE is established at the published list price for the offering. Explai n to us your basis for conc luding that the published list price represents VSOE. As part of your response, explain why you believe this method of establishing VSOE complie s with the requirements of SOP 97-2, paragraph 10. In this regard, we note that your response suggests there is a range of prices at which services are sold, and that customar y pricing practices can only be established once a sufficient history of actual prices has been developed. In view of this, explain to us how you are ab le to conclude that the list price, once established, will not change. 2. Your response to prior comment number 6 indicates that, to the extent that optional stated renewal fees are below a substantive minimum VSOE rate based on your historical sales, revenue is allocat ed to PCS to the extent necessary to adjust deferred PCS revenue to the minimum VSOE amount. Explain to us your basis for this method of determining VS OE in circumstances where the stated renewal rate is determined to be non-s ubstantive. As part of your response, provide reference to the specific authorit ative literature or other guidance that supports your accounting. Also, explain why, given that you use the stated renewal rate method for determining VSOE for PCS, in cases where the stated renewal rate is not substantive, you are not required to conclude that VSOE for PCS does not exist.
As appropriate, please amend your filing and respond to these comments within 10 business days or tell us when you will provid e us with a response. Please submit all correspondence and supplemental materials on EDGAR as required by Rule 101 of Regulation S-T. You may wish to provide us with marked copies of any amendment to expedite our review. Please furnish a cove r letter with any amendment that keys your responses to our comments and provides any requested information. Detailed cover letters greatly facilitate our review. Please understand that we may have additional comments after reviewing any amendment and your responses to our comments.
Mr. Michael J. Saylor Microstrategy Incorporated November 8, 2006 Page 3
You may contact David E dgar at (202) 551-3459 or me, at (202) 551-3489 if you have questions regarding these comments.
Sincerely,
Brad Skinner
A c c o u n t i n g B r a n c h C h i e f
Show Raw Text
Room 4561
November 8, 2006
Mr. Michael J. Saylor
Chairman, President and Chief Executive Officer
Microstrategy Incorporated
1861 International Drive
McLean, VA 22102
Re: Microstrategy Incorporated
Form 10-K for the Fiscal Ye ar Ended December 31, 2005
Filed March 10, 2006
File No. 000-24435
Dear Mr. Saylor:
We have reviewed your response letter dated August 11, 2006 and have the
following additional comments. We may as k you to provide us with supplemental
information so we may better understand your disclosure. Please be as detailed as
necessary in your explanation. After reviewing this inform ation, we may raise additional
comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall
disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about our comments or any other aspect of our
review. Feel free to call us at the telephone numbers listed at the end of this letter.
Mr. Michael J. Saylor
Microstrategy Incorporated
November 8, 2006 Page 2
Form 10-K for the Year Ended December 31, 2005
Financial Statements
Notes to Consolidated Financial Statements
Note (2) Summary of Significant Accounting Policies, page 65
(j) Revenue Recognition, page 68
1. We note your response to prior comment number 6 from our letter dated July 28, 2006. Your response indicates that, for ne w offerings or offering that have not
had a sufficient history of sales volume, VS OE is established at the published list
price for the offering. Explai n to us your basis for conc luding that the published
list price represents VSOE. As part of your response, explain why you believe
this method of establishing VSOE complie s with the requirements of SOP 97-2,
paragraph 10. In this regard, we note that your response suggests there is a range of prices at which services are sold, and that customar y pricing practices can only
be established once a sufficient history of actual prices has been developed. In
view of this, explain to us how you are ab le to conclude that the list price, once
established, will not change.
2. Your response to prior comment number 6 indicates that, to the extent that
optional stated renewal fees are below a substantive minimum VSOE rate based
on your historical sales, revenue is allocat ed to PCS to the extent necessary to
adjust deferred PCS revenue to the minimum VSOE amount. Explain to us your basis for this method of determining VS OE in circumstances where the stated
renewal rate is determined to be non-s ubstantive. As part of your response,
provide reference to the specific authorit ative literature or other guidance that
supports your accounting. Also, explain why, given that you use the stated renewal rate method for determining VSOE for PCS, in cases where the stated
renewal rate is not substantive, you are not required to conclude that VSOE for
PCS does not exist.
As appropriate, please amend your filing and respond to these comments within
10 business days or tell us when you will provid e us with a response. Please submit all
correspondence and supplemental materials on EDGAR as required by Rule 101 of Regulation S-T. You may wish to provide us with marked copies of any amendment to expedite our review. Please furnish a cove r letter with any amendment that keys your
responses to our comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we may have additional comments after reviewing any amendment and your responses to our comments.
Mr. Michael J. Saylor
Microstrategy Incorporated
November 8, 2006 Page 3
You may contact David E dgar at (202) 551-3459 or me, at (202) 551-3489 if you
have questions regarding these comments.
Sincerely,
Brad Skinner
A c c o u n t i n g B r a n c h C h i e f