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Micro Focus: A fall from grace

Almost three years on, the company is still struggling with its HP acquisition
Micro Focus: A fall from grace

Micro Focus (MCRO) was once theUK’s largest public technologycompany, with a market capitalisationof more than £9bn. For a number of years it enjoyed significant success pursuing a strategy of acquiring legacy software businesses, cutting their costs, cross-selling their products and juicing out cash. However, times have changed and now its market capitalisation stands at just over £1bn.

IC TIP: Sell at 296p
Tip style
Sell
Risk rating
High
Timescale
Long Term
Bull points

Good cash conversion

Potential takeover target

Bear points

High net debt

Rising short interest

Weaker quality of revenues

The fall from grace has been spectacular: the company saw more than half of its value erased in just the past two years alone. And we think its share price could have further to fall – an opinion that seems to be shared by a number of hedge funds, with the 3.7 per cent disclosed short positions placing the IT firm among the25 most shorted shares in London. 

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