Software vendor expects revenue to decline more than expected
Struggling software conglomerate Micro Focus is under increasing pressure due to what it calls “poor sales execution” and “deteriorating market conditions,” causing its full-year revenue forecast to fall further than previously expected.
The Lowdown: In newly released projections, the British software company said its full-year sales will decrease between 6% and 8% this year. Previously, Micro Focus projected sales declining between 4% and 6%. The worsening forecast is sapping the confidence of investors, which caused the company’s stock to plunge 35% following the announcement.
The Details: Micro Focus’ management is focusing on cutting costs and improving its go-to-market productivity to reverse its declining fortunes. The company, built through a series of acquisitions of legacy software vendors, continues to struggle with integrating and operationalizing its various channels to generate consistent revenue.
The Impact: The revenue decline will likely put more pressure on Micro Focus’ channel partners to generate more demand and revenue – particularly for its non-legacy software products, such as security. Earlier this year, Micro Focus launched a new channel program that made all of its products available to channel partners around the world.
Background: The root of Micro Focus’ challenges is in the way the company came together through acquisitions. In 2017, Micro Focus acquired HP’s software unit for $8 billion. While the HP products added to its portfolio of legacy applications that business rely upon, it was a harbinger of troubles to come. HP was already struggling to bring together a coherent message for its security, development operations, hybrid IT management, and predictive analytics. The deal resulted in the first negative forecast in 2018 that caused the departure of CEO Chris Hsu. Analysts say Micro Focus hasn’t fully recovered from the shock of absorbing HP’s software.