Shares of MicroStrategy ( MSTR) were hammered for a second day in a row Tuesday as investors appeared to worry about an increase in the company's tax rate.

Shares of MicroStrategy, which makes business intelligence software, fell $4.94, or 8.6%, to $52.73 Thursday. That drop came after the stock fell $3.53, or 6.1%, Monday.

In the past two days, at least two sell-side analysts have raised the possibility of the company's tax rate going up substantially after reviewing the company's 10-K filing with the Securities and Exchange Commission.

"Investors should also be aware that MicroStrategy benefits from extremely low effective tax rates because of its net operating loss carry-forwards," JMP Securities analyst Pat Walravens wrote Monday. "An increase in effective tax rates would likely reduce forward EPS estimates for MicroStrategy." (Net loss carry-forwards are accumulated net losses that can be used to offset future profits, reducing a company's tax bill.)

Basically, McLean, Va.-based MicroStrategy has had a low tax rate because of its string of losses in four out of the last five years. MicroStrategy has accumulated $290 million in domestic net operating losses carry-forwards that do not expire until 2019 and $24 million in foreign net operating losses that begin to expire in 2005.

MicroStrategy generated 34% of its total $175.6 million in revenue in 2003 from international operations, where it stands to get socked first by a bigger tax bill, Walravens observed. Its foreign operations registered $7.4 million in net income from continuing operations before taxes last year, while its U.S. operations posted a $14.5 million net loss from continuing operations before taxes, according to the 10-K filing.

"If MicroStrategy generates more income than it has net loss carry-forwards in certain foreign jurisdictions, it may see its effective tax rate increase," warned Walravens, who has a market underperform rating on MicroStrategy. (His firm hasn't done any banking with the company.)

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