Micro Focus, macro losses – £4.5bn wiped off tech giant's market value... Here's how City analysts reacted

 
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Billions of pounds were wiped from Micro Focus' stock market valuation this morning (Source: Getty)

Shocked Micro Focus investors scurried for cover today as sales fell sharply and its chief executive stepped down.

Britain's biggest listed tech firm saw shares fall more than 55 per cent, wiping around £4.5bn from the firm's market capitalisation.

Micro Focus's executive chairman, Kevin Loosemore, who last year netted pay of £24m, said operational issues were at the heart of a "disappointing short-term performance". However, the company insisted a cost-cutting programme was ahead of schedule and Loosemore said he was confident in the firm's strategy.

Here's how City analysts reacted.

Read more: Here's why shares in FTSE 100 tech firm Micro Focus are down 55 per cent

Hocus Pocus Micro Focus

“It was not for nothing that Micro Focus used to be nicknamed ‘Hocus Pocus Micro Focus’ by analysts in the 1990s, as a result of its volatile earnings and reputation for dishing out profit warnings,” said AJ Bell investment director Russ Mould.

After a spell in private equity ownership the company’s return to the stock market got off to a rocky start in 2005-06, with an initial series of trading alerts and the sudden departure of the then CEO.

Investors with long memories will therefore be wondering whether the company has returned to type, after the company’s second disappointing update in just three months and a collapse in the share price.

Read more: Best paid in 2017: Micro Focus boss set for macro bonus

IT issues

UBS analyst Michael Briest said: "Micro Focus cites continuing licence weakness as a factor, which suggests a double-digit licence decline will be seen (around 10-25 per cent).

It notes that the roll-out of a new IT system has impacted on salesforce efficacy, while there has also been higher salesforce attrition and disruption at Hewlett Packard Enterprises [HPE] global customers resulting from the de-merger, along with continued sales execution issues, especially in North America.

Micro Focus is reviewing whether it will migrate Micro Focus to the new HPE-heritage system by the end of October.

Crash

"Shares in Micro Focus crashed after the company issued another profit warning and stated that CEO, Chris Hsu, will be stepping down with immediate effect," said CMC Markets analyst David Madden.

"Stephen Murdoch, the COO, will be replacing Mr Hsu. The company stated that revenue would decline between six per cent and nine per cent, compared with the previous guidance for a drop of between two per cent and four per cent."

Read more: Here's why Micro Focus shares plunged despite posting an 80pc sales rise

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