Micro Focus shares slide after profits warning

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Micro Focus shares slide after profits warning

Simon Quicke

Micro Focus has admitted that the revenue it managed to hit in the three months to 31 January were below its own expectations and it will not be able to make up the shortfall by the end of its fiscal year.

Shares lost a quarter of their value following the update yesterday which saw the company blame a drop in revenues on weak demand for its Cobol development, modernisation and migration services, with America being particularly weak.

Maintenance fee revenues were in line with expectations and consultancy fee income was slightly ahead of the first year average.

"When compared to the same period last year on a constant currency basis total revenues in Q3 FY11 are down primarily due to lower licence fee revenues," the firm said in an interim management statement.

The company also revealed that its management team, which has been running a review of the business since last October, has completed that process.

"The review has identified the product lines that are expected to drive the long term growth of the company.  As a result management is undertaking a restructuring of the business to ensure focus and investment in these growth areas, whilst maximising efficiencies elsewhere," the firm stated.

There are also a number of non-strategic products that are in long term decline affecting overall growth rates and where the company will make changes to investment levels. This product group will be identified separately in future reporting to provide greater insight into the dynamics in the portfolio and management will consider all strategic options for their future.

Some of the non-strategic products that are in decline will be see investment levels cut and the firm has warned there will be a restructuring charge of between $14m and $18m in the final quarter of this year.

This story was amended on 17 February. We mistakenly said the period covered in Micro Focus' statement ended on 31 October 2010 instead of 31 January 2011. 


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