Case Updates

January 8, 2018

News:

“Tech star’s £2bn hit: Micro Focus flops after it reveals lacklustre earnings amid doubts over £6.5bn takeover”

Almost £2billion was wiped off the value of Micro Focus after it revealed lacklustre earnings and doubts grew about its £6.5billion takeover of Hewlett Packard’s software arm. Britain’s biggest tech company admitted revenues at HPE Software were at the bottom of expectations and those at its existing businesses had dipped 2.9 per cent. The weak performance spooked investors and shares fell 17 per cent. Bosses insisted the merger was taking time to bed-in and the business remained in a strong position. But they announced a boardroom shake-up, putting finance chief Mike Phillips in charge of mergers and acquisitions. For the six months to October 31, Micro Focus reported revenues of £910.4million overall and a profit of £162million.

“Micro Focus Expects FY18 Revenue to Fall More Than Expected; CEO Resigns”

Micro Focus International PLC (MCRO.LN) said Monday that it expects constant-currency revenue for fiscal 2018 to fall more than previously anticipated, and that Chief Executive Chris Hsu has resigned.

The software company said it estimates revenue at constant currency to decline in a range of between 6% and 9% for the twelve months ending Oct. 31, compared with the pro forma revenue for year ended Oct. 31, 2017. In January, the company said it expected revenue to decline between 2% and 4%. The weaker revenue performance is primarily due to lower-than-expected license income, Micro Focus said.

The company said the impact of this revenue fall in adjusted earnings before interest, taxes, depreciation, and amortization margin percentage for fiscal 2018 is expected to be mitigated by progress made in its cost-reduction program. This program is currently ahead of schedule, the company said.

“Micro Focus still finds it hard to digest HPE buy and loses $69m”

MICRO Focus’s admission it is still struggling to handle the purchase of Hewlett Packard Enterprise’s assets, two years after the tie-up, sent the shares tumbling today.

The tech business, which helps companies replace, and maintain the life of, ageing software systems, bought HPE’s software business in an $8.8 billion (£6.6 billion) deal in 2016, which quadrupled the size of the business. But the integration is still proving tricky despite “a slowdown in the rate of revenue decline”.

The company, which warned on profits in March, said earnings fell 8% to $1.9 billion for the six months to April 30, and earnings will deteriorate further this year.

It made a pre-tax loss of $68.5 million, compared with a profit of $83.1 million last year. The shares fell 6.9%, or 90p, to 1213.5p.

News:

“Micro Focus still finds it hard to digest HPE buy and loses $69m”

The company reported Tuesday revenue fell 7.5% to $1.66 billion. Micro Focus posted a loss before tax for the half year ended April 30 of $99.6 million, compared with a loss of $100.9 million for the previous-year period. The company said it continues to expect revenue at constant currency from continuing operations to fall by 4% to 6% in the year ending Oct. 31.

News:

“Micro Focus shares tank 30 per cent as CEO launches strategic review”

Micro Focus’ share price plummeted by over 30 percent today after the British software vendor revealed it would miss revenue guidance. In a trading update, Micro Focus said that it would not hit constant currency guidance of a year-on-year decline of between four and six per cent in its fiscal year. The firm said that “weak sales execution” has been compounded by a “deteriorating macro environment” which has led to longer decision-making times from buyers. CEO Stephen Murdoch said that poor performance has triggered an assessment of the business.”Following the recent disappointing trading performance, we have determined that it is appropriate to accelerate the undertaking of a strategic review of the group’s operations with a view to determining where performance can be improved and how the business can be better positioned to optimise shareholder value,” he said.”We are fully committed to meeting the needs of our customers through the ongoing delivery of innovation within our exceptional product portfolio. “While the review is taking place, management will continue to drive previously targeted improvements in business performance and execute the operational initiatives already in place.”