Micro Focus revenues decline less than expected as CEO Stephen Murdoch claims the company has been repaired

Micro Focus posts lower than expected fall in revenues - largely due to SUSE, which it's selling

Micro Focus has posted annual revenues down by 5.3 per cent to $4.06 billion in its pro-forma results for the year to the end of October 2018 [PDF]. The decline was smaller than feared, following the company's troubled absorption of the software arm of HPE. The company also posted a pre-tax loss for the 12-month period of $78.5 million.

However, excluding the SUSE Linux business, the revenue decline is a weightier 7.1 per cent for the period, and in-line with the six-to-nine per cent revenue decline the company had forecast. Micro Focus is currently in the process of selling the SUSE Linux unit for $2.535 billion to investment firm EQT Partners.

Following the ambitious $8.8 billion HPE software merger in 2017, Micro Focus shares have fallen by 26 per cent as integration and other issues have come to the fore.

CEO Stephen Murdoch described the results as "solid", but emphasised the company's returns to shareholders in the form of share buybacks and dividends. Shareholders have also been buttered-up with the promise of the proceeds of the SUSE sale being returned to them.

In his report, Murdoch pointed to "recent operational improvements" and claimed that there was evidence of "stabilisation" of the company's "revenue performance", but added that "there is a great deal still to do".

Licence revenues declined by 12.8 per cent in the 12 months to the end of October 2018, but with the revenue decline decreasing in the second half of the period. Maintenance revenues declined by 2.7 per cent, while software-as-a-service "and other recurring revenue" increased by 3.3 per cent. SaaS revenue growth was affected by the discontinuance of unprofitable "operations and practices".

Consulting revenues, meanwhile, declined by 24.6 per cent, a fall that the company attributed to a decision to focus its consulting services around its software portfolio.

Worryingly, perhaps, the company also posted a decline in security software licence revenues - a sector that ought to be booming in the current environment - although SaaS and recurring revenues in the security sector increased by 23.6 per cent. The company blamed "sales execution issues" for the poor performance.

Overall, the report conveys the impression of a broken company, with problems in the company's own IT systems, sales execution and recruitment, although Murdoch claims that it is already on the way to being fixed.