Development tools software firm Micro Focus, which parted company with its CEO Nigel Clifford in April (see Clifford departs Micro Focus), has posted preliminary results for the year to 30 April, significantly below management expectations. Micro Focus managed to achieve just 0.8% top line growth with revenue at $436.1m (vs. 57% growth to $433m in FY09 – see here), meanwhile adjusted operating profit (before exceptional items, amortisation and share based compensation) fell 8.9% to $153m. On a pro-forma basis, adjusting for the full year effect of the declining Borland and Compuware acquisitions, revenue actually fell by 6% (see Micro Focus fails to answer our ‘one big question’).
As HotViews readers will know, Micro Focus is currently in takeover discussions with PE companies Bain Capital and Advent Capital (see Micro Focus confirms bid approaches). The shares shot up to 399 pence when the initial announcement was made in May, but have since fallen back to 341 pence, and are down 4% today. Now there are “a number of potential offerors” on the table, “in relation to a variety of possible structures”, although of course there is no guarantee that any of this will lead to a deal being made. So plenty here to keep management busy, or indeed distracted.
Executive chairman Kevin Loosemore admitted: "This has been a disappointing year for Micro Focus” due to the poor execution over the past year around the company’s product management and sales execution. Headcount has been cut by 16% to 1,206 since the start of 2011, including the departure of the company’s chief marketing officer and head of development. Loosemore is putting a lot of effort in this area now as he aims to make “rapid changes to the way in which…products are priced and packaged”. This includes the use of direct sales via the web, which surprisingly have not been exploited to date.
Looking ahead, Micro Focus’ revenue is expected to decline in the year to April 2012, so the emphasis is going to be on margin protection, and no doubt more restructuring. Distractions and further uncertainty seem inevitable while the discussions about its future continue to draw out.