MicroStrategy CEO Phong Le on Bitcoin and Business Intelligence

Phong Le, President and CEO of MicroStrategy, discusses the company’s business intelligence tools and its bitcoin strategy with OPTO Sessions, explaining how in tandem they have enabled it to become one of the best-performing stocks on the S&P 500 in recent years.

Phong Le is President and CEO of MicroStrategy [MSTR], a business intelligence (BI) software business that has gained recognition for becoming the first company in the world to adopt bitcoin as its primary treasury reserve asset.

Le began his career at Deloitte, then worked for NII Holdings and XO Communications before joining MicroStrategy as its CFO in 2015. He became President and CFO in 2020, and then became CEO in 2022 when the company’s founder, Michael Saylor, stepped away from the role to become Executive Chairman.

The Intelligence Business

While it has gained fame for its bitcoin strategy over recent years, MicroStrategy was originally known as one of the first BI software companies, having launched in 1989. 

Its BI tools are particularly popular among large enterprises: according to Le, half of the Fortune 500 companies are its customers. 

“We have about 4,000 customers worldwide; millions of people using MicroStrategy. We’re proud of that heritage,” he says.

Le lists major retail brands such as Starbucks [SBUX] and British supermarket chain Sainsbury’s [SBRY:L] as being among its largest customers.

Additionally, major pharmaceutical companies like Pfizer [PFE] and AstraZeneca [AZN] use MicroStrategy, as do the governments of the US, UK, France, Switzerland and Germany. 

Le defines MicroStrategy’s products as the specific touchpoints used by individuals in businesses to connect to the data on which their business depends.

“You walk into Sainsbury’s, there’s people walking around with iPads or handheld devices with MicroStrategy sitting on top of those, giving them real-time inventory information. You walk into a Starbucks, the manager there, every single day, looks at MicroStrategy to understand how many grande lattes they sold.”

As another use case, he explains how a company like Pfizer could use MicroStrategy to equip its salespeople with the insights they need when selling to hospitals. The data required to execute deals effectively comes from very diverse sources — hospital data about the number of patients, information on decision-makers contacted at the hospital, current drug prices and inventory, and so on.

“That doesn’t all come from one place. It’s not a customer relationship management system, it’s not an enterprise resource planning system… it’s really a complex analytical problem that brings in data from multiple places.”

From BI to bitcoin

Le puts MicroStrategy’s bitcoin strategy — which began in 2020 during his tenure as CFO — among its greatest technological innovations.

There are several ways that companies can allocate excess cash. One is to put it into short-term treasury bills. However, these often pay less than the rate of inflation. “If you’re making less on your corporate treasury bills than the inflation rate, you’re actually diluting the company’s capital,” says Le. 

Another strategy is to reinvest excess cash into the business. “We do that. We take certain parts of our excess cash flow, and we innovate. We invest more into new technologies.” However, the return on these innovations still needs to outpace inflation — otherwise this strategy, again, dilutes the company’s capital — which isn’t easy to achieve.

Some companies spend excess cash on M&A. 

“That works in certain spaces like manufacturing, where you get economies of scale, but in software and technology, M&A can actually be very dilutive.” He explains that various former competitors of MicroStrategy — such as BusinessObjects and Cognos — have gone downhill technologically and as businesses since being acquired by larger competitors. 

“The last thing you can do is give excess cash back to shareholders in the form of dividends or stock buybacks. That means you’re decapitalizing the company. It means you’ve got nothing better to do with your money than to give it back to the shareholders.”

Instead, Le believes that the best thing a corporate treasurer can do is to invest excess cash in the highest-return asset available. “That’s what we did. We found bitcoin, which on average at that point in time, was growing about 40–50% a year.”

The strategy has been successful; in the four years to September 11, MicroStrategy’s stock has gained 825.41%; as a comparison, Nvidia [NVDA] has gained 852.04% in the same period. 

Accounting for bitcoin

MicroStrategy values the bitcoin on its balance sheet as an indefinite intangible asset. This means that every individual bitcoin it holds is valued at the lowest price it has ever reached during its existence. Falls in bitcoin prices devalue the holdings — but subsequent gains don’t increase value beyond this point.

“I bought bitcoin at $63,000. Last week, bitcoin went down to $53,000. At the end of this quarter, I will have to show that bitcoin on my balance sheet at $53,000 and I take that $10,000 loss. 

“When the Bitcoin goes back up to $63,000, $73,000 or $83,000, I don’t show it on my balance sheet.”

In December 2023, the Financial Accounting Standards Board changed its guidance to allow cryptocurrencies to be accounted at fair value — i.e., at whatever its market value is at a given point in time (e.g., quarter-end). The new guidelines are mandated from December 2024, though companies can adopt them earlier if they wish. While MicroStrategy hasn’t yet made the switch, Le believes the fair value method is “much, much better”.

While the strategy was initially a means of spending the excess cash generated by MicroStrategy’s BI business, Le and his colleagues have found that accessing capital markets — by issuing either equity or debt — has been an effective means of increasing bitcoin holdings.

He says MicroStrategy pays approximately 1.6% interest on its $3bn debt, which has been used to buy bitcoin — priced at $57,647.50 as of September 11 — for an average of $36,000 per coin. This increases the enterprise value of the company, which in turn allows it to take on more equity and issue more debt.

“You can do the math,” he says. “We’ve made a pretty good paper profit on that bitcoin.”