Micro Focus suffers shares slump amid revenue fears

CEO Chris Hsu leaves as analyst points finger at HPE merger difficulties

Micro Focus has seen its shares collapse and CEO depart after it issued a sales warning to investors this morning.

The British company, which completed an $8.8 billion "spin-merge" with the software division of Hewlett Packard Enterprise (HPE) in September 2017, warned year-on-year revenue is likely to fall by between 6% and 9%.

Previously it had predicted a slowdown of just 2% to 4% for the 12 months ending 31 October 2018, but worse than expected results in January have caused it to downgrade its forecast.

The company's shares fell 41% to their lowest value since 2006 as markets opened in London, hitting 11.16. The price has continued to fall throughout the day.

Advertisement - Article continues below
Advertisement - Article continues below

CEO Chris Hsu, who joined Micro Focus from HPE following the spin-merge last year, departed the company with immediate effect on Sunday. Stephen Murdoch, until now the organisation's COO, has taken Hsu's place.

In a blog post, TechMarketView analyst Angela Eager pointed squarely at the HPE deal as the cause of the problem.

"It was always going to be a big meal but Micro Focus is finding it harder to digest HPE Software than expected," Eager said.

"There will be a knock-on effect on adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) margin percentage (which is the KPI Micro Focus rates above revenue), although the company says it will be mitigated by the cost reduction programme which is ahead of schedule. Micro Focus now expects an Adjusted EBITDA margin percentage of approximately 37%, which is way down on the 46.2% of the year ending April 2017 (prior to the HPE Software merger)."

Other areas blamed by Micro Focus for its troubles include implementation issues with a new IT system that has cause problems with sales efficiency, the ability to transact with partners and cash collection; sales staff attrition due to integration and the IT-related issues: disruption of ex-HPE global customer accounts as a result of the spin-merger; and continued sales fulfilment issues, particularly in North America.

In an interview with Bloomberg, Kevin Loosemore, chairman of Micro Focus, said: "Clearly we have let people down with this execution and we have to rebuild that trust."

Advertisement - Article continues below

He remained positive about the HPE deal, however, adding: "The strategy remains the same. We believe this deal will turn out to be a good deal. We think the market in infrastructure software will continue to consolidate and we hope to participate in this consolidation."

Featured Resources

Digital Risk Report 2020

A global view into the impact of digital transformation on risk and security management

Download now

6 ways your business could suffer if you don’t backup Office 365

Office 365 makes it easy to lose valuable data regularly, unpredictably, unintentionally, and for good

Download now

Get the best out of your workforce

7 steps to unleashing their true potential with robotic process automation

Download now

8 digital best practices for IT professionals

Don't leave anything to chance when going digital

Download now


Business strategy

Everything you need to know about HPE

14 Feb 2020

The IT Pro Products of the Year 2019: All the year’s best hardware

24 Dec 2019
public cloud

HPE takes on public cloud with GreenLake Central

3 Dec 2019
hybrid cloud

HPE hybrid IT revenue falls 11% triggering share slump

26 Nov 2019

Most Popular


How to use Chromecast without Wi-Fi

5 Feb 2020
operating systems

How to fix a stuck Windows 10 update

12 Feb 2020

The top ten password-cracking techniques used by hackers

10 Feb 2020

Microsoft to add Defender antivirus software to Linux, iOS and Android

21 Feb 2020