Micro Focus shares plunge by 46% as CEO departs

Shares in Micro Focus crashed after the software firm warned sales were falling faster than expected and said that its chief executive had departed after just months in the job.

The FTSE 100 company lost nearly half its market value by the close of trading on Monday, with the shares down 46% to £10.11.

The firm, which has grown out of a series of acquisitions, said its chief executive, Chris Hsu, had stepped down and been replaced by the chief operating officer, Stephen Murdoch.

Hsu, who previously ran Hewlett Packard Enterprise’s software division, took the helm at Micro Focus after it completed the £6.6bn acquisition of the business in September to create one of the world’s leading software companies. It is understood he is not getting a payoff and does not have another job lined up.

Micro Focus warned its year-on-year revenue decline had been worse than expected since early January. It is now expecting sales to fall between 6% and 9% in the year to 31 October, compared with 2% to 4% previously. Performance is forecast to be even worse in its first half to 30 April, with the firm expecting a sales drop of 9% to 12%.

The Berkshire-based firm blamed problems with the integration of the HPE Software business last year, which had led to lower-than-expected licence income, issues related to its new IT system and the loss of sales staff. It plans to hire 50 to 60 more salespeople.

HPE Software includes assets from Hewlett Packard’s 2011 purchase of the UK software firm Autonomy. The acquisition was the biggest Micro Focus had ever made and involved the firm taking control of a business bigger than itself. It insisted the problems were operational and could be fixed.

Russ Mould, investment director at the stockbroker AJ Bell, said: “Micro Focus’s deal to buy HPE’s software business was huge and very complicated, not least because both firms had already done a lot of deals.

“Investors need to be wary of firms which make multiple acquisitions, especially if they are big and seen, or described, as transformational as the scope for something going wrong is considerable – as shareholders in Marconi, Royal Bank of Scotland or more recently Carillion will attest.”