Microstrategy Times Square Ad

MicroStrategy pitching its software wherever there's a crowd. In this case, via a billboard at Times Square. Credit: MicroStrategy via Facebook

Shares of MicroStrategy (NASDAQ:MSTR) stock fell just over 10% in late trading after reporting fourth-quarter revenue that came well short of expectations. Here's a closer look at the final totals versus Wall Street projections:

MicroStrategyRevenueYoY GrowthEPSYoY Growth
Consensus estimate $167.73 million 1.1% $1.04 (27.3%)
Q4 actuals $148.87 million  (10.3%)  $1.99   39.2% 
DIFFERENCE ($18.86) million (11.2%) +$0.95 +66.5%

Sources: Yahoo! Finance and MicroStrategy press release

MicroStrategy didn't offer a comment on the results in its earnings press release. Instead, the company turned to customer testimonials and research that positions its product as best in providing business intelligence via mobile devices.

"In December 2014, MicroStrategy announced that independent analyst firm Dresner Advisory Services rated MicroStrategy the number one overall offering out of 25 vendors for 2014 Mobile Computing / Mobile Business Intelligence (BI). This is the fourth year in a row that MicroStrategy has topped the list of vendors," the company said.

What went right: Profits soared thanks to careful expense management. All told, MicroStrategy cut its cost of revenue by 4% and operating expenses by 26.5%. Earnings improved 39% as a result.

What went wrong: Overall revenue fell 10.3%, while product and subscription revenue declined 31%. Worse, product support accounted for just over half of sales, up from 44% in fourth quarter 2013. MicroStrategy appears to be having a tougher time selling its newest technology.

What's next: MicroStrategy didn't include guidance in its press release. What do analysts say? According to S&P Capital IQ, the company is on track to earn $144.79 million in first-quarter revenue and $0.60 in profit. Both figures would make for a significant improvement over the same period last year ($137.9 million in revenue and a $0.57 per share loss, respectively).

Longer term, analysts have MicroStrategy generating 15% average annual earnings growth over the next 3 to 5 years.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He loves a good strategy game but didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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