Investors in Micro Focus (MCRO) have endured a bumpy few months, to say the least. However, things could be looking up. The software provider has agreed to sell SUSE – its open source software business – for $2.5bn (£1.9bn) to Swedish private equity group EQT. This compares favourably to Micro Focus’s $2.35bn acquisition of The Attachmate Group in November 2014, of which SUSE was only one part – constituting just over a fifth of Attachmate’s total revenues. The sale proceeds will go towards paying transaction-related taxes, and may be used to pay down debt and/or to return cash to shareholders.
Analysts at Barclays have “mixed feelings” about this disposal. On the plus side, it removes uncertainty and strengthens the balance sheet, while investors could see a payday. That said, SUSE comprised an “exciting longer-term aspect of the story”, now no longer to be enjoyed. Barclays reckons it could have been worth around $3bn in time.
In March, the IT giant’s market capitalisation halved in just one day, on the news of difficulties with the integration of Hewlett Packard’s software business – acquired last September for $8.8bn. Management cut its full-year sales guidance, forecasting a drop of 6 to 9 per cent at constant currencies versus the 2 to 4 per cent decline previously expected. Chief executive Chris Hsu also resigned.
There was some reassurance in May, when the group said half-year revenues to April would be better than the anticipated fall of between 9 and 12 per cent. However, this was partly thanks to an unusually large licence deal, valued at approximately $40m, which had closed early. Management reiterated March’s downgraded forecasts for the full year.
