Shares in Britain’s Micro Focus halve

MICRO Focus International lost more than half of its value yesterday after Britain’s leading software company ditched its chief executive and cut its revenue outlook due to problems integrating assets from Hewlett Packard Enterprise.

The FTSE 100 company, which manages older software for customers including banks and airlines, also reported lower-than-expected licence income, wiping £4.6-billion (R77.8-billion) off its market value in a matter of hours.

Previously little known, Micro Focus spent $8.8-billion (R106-billion) last year to buy HPE’s software and join the ranks of leading European software makers.

The deal included the old Autonomy business, another British firm bought by the US company in an illfated deal five years earlier.

“We’re finding the integration harder than we’d anticipated or planned,” executive chairman Kevin Loosemore said.

“[We have] no regrets at all [on the deal but] the returns clearly may be delayed slightly.”

Headquartered in Newbury, west of London, Micro Focus was founded in 1976 and built itself up by growing its own software business and acquisitions, with the purchase of the larger HPE transforming the company.

The group sells and licenses legacy software that had been neglected by previous owners, helping to extend the life of computers and avoid spending on newer systems.

It competes with the likes of Germany’s Software AG.

It focuses on improving margins, not the top line.

But yesterday it was forced to say that issues relating to a new IT system had affected the sales team while HP’s global customer accounts had been disrupted by its demerger.

It now expects revenue in the year to October 31 to fall by between 6% and 9%, compared with a forecast given in January of down 2-4%, a prediction that sent its shares down 17% at the time.

Micro Focus said chief executive Chris Hsu, who joined from HPE, had quit to spend more time with his family and would be replaced by chief operating officer Stephen Murdoch, who has been with the British firm for 5½ years.

Hsu was named chief executive in January last year and took on the role following the completing of the HPE deal last September.

Loosemore said the group’s balance sheet remained strong and its dividend policy would not change, but he accepted the group’s overall performance needed to. – Reuters