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Further to my post Micro Focus revisited – occasioned by the abrupt departure of their CEO Nigel Clifford – Stephen Kelly contacted me. I’d mentioned that Kelly’s ‘3 in 3’ target had been ‘to triple the market value in 3 years'’. Kelly pointed out that this was not correct. The 3 in 3 target was “to triple run rate revenues within three year” which Kelly says he achieved. Regardless, actually Kelly did even better when measured by share price which was c90p on his appointment in May 06 and had risen to over 400p just before his departure in Sept 09. No extra shares had been issued but a lot of extra debt had been taken on to fund those acquisitions.
Kelly added “In my opinion, great Mgt Teams focus on the core fundamentals of operational leverage and growth and let the stock price take care of itself.
Mgt teams can only genuinely 'control' expenses . Great mgt teams in tough markets can connect strategy with awesome execution to grow revenues. Mgt teams must always focus on the business fundamentals of expense/investment, revenues, free cash flows/profitability. Consistent performance over a sustainable time builds TRUST with the investors. Shareholder trust of Management teams takes years to build and seconds to destroy.
'3x3' was an ambitious rallying call for the whole company to deliver against elements where Mgt had some control. It is the shareholders who determine the market value always.”
There are many opposing views on Micro Focus both ‘during Kelly’ and ‘post Kelly’. We will leave that debate for another day. But we, for one, had great hopes that Micro Focus would become one of those very rare breed of UK-HQed software companies that ranked on the global stage. Maybe those hopes were built on sand? Regardless, we don’t see those ambitions anymore.
