Micro Focus Share Discussion Threads

[sbb1x] 11/5/2021 11:28

Any idea when next update is due people... thanks in advance!

[rochdae] 11/5/2021 11:21

sr2day, thought you were looking to buy your next tranche following your 505ish entry? So have you sold up at a loss?

[p1nkfish] 11/5/2021 10:55

While longer & lower.

[p1nkfish] 11/5/2021 10:55

Good reason this is showing current weakness, it will turn but not yet.
May be a while longer.

[sr2day] 11/5/2021 10:48

The chart says it all,the lady still undressing,pay attention.once the knickers are off i,ll be back in.

[elsa7878] 11/5/2021 10:29

What tripe. Rotation out of growth into value. Hence Dow doing well while Nasdaq ain't. Commodities have been on fire for a year.

[montyhedge] 11/5/2021 10:21

Rotation out of tech into commodities.Copper etc.

[dr knowledge] 11/5/2021 09:24

Funny how when America (or in this case both China/America) sneezes, the FTSE gets a cold and MCRO gets Pneumonia! ;-(

[p1nkfish] 11/5/2021 06:09

Those examples are not under normal market conditions, whole swathes of the market were hit.

The report was paid for, very well researched and not cheap. I no longer have access or a copy. Very useful to investment houses in US with a wide mandate.

[rochdae] 10/5/2021 22:49

p1nkfish,

I disagree. Do you have the link. Look at all the recovery plays this year .. gregs today, superdry last week, apf, ferrexpo ... the list is endless. Even mcro was 200 only a few months back, now near 500, almost 600 a last month. Near 300% improvement in a half year. The market doesn't care about the past. It has no past I would suggest. It has a psychology certainly, but that's something different.

[p1nkfish] 10/5/2021 22:34

There was a study a few years back on the time taken for recovery and rehabilitation post market disappointment. It covered many disappointments down to missing just one quarter earning expectation.

Summary, about 18-36 months until out of the dog house even if it was only a one quarter problem and results recovered.

The market does have memory.

[rochdae] 10/5/2021 22:15

I think this fall from grace is far from unusual in the market. The market also has no memory really, is just trades in the present buying yield imo.

Also, the model actually worked for many decades. Growth through acquisition and assimilation took mcro to 2500 in quick time. It just came unstuck with the HP acquisition which proved a bridge too far ... as huge miscalculation really.

There is hidden value though with mcro. It remains a massive cash generation operation. Divi this year perhaps up to 30p imo.

Anyway, facts change perceptions. See what happens with the trading update. I remain optimistic going forward though.

[purchaseatthetop] 10/5/2021 20:55

well we will not have to wait long now to find out. MCRO is a classic example of the market not believing a company when it has created such carnage in recent past. I mean to pay dividends for 2 years in excess of the company EPS is an act of such stupidity that is is barely credible.

[rochdae] 10/5/2021 17:10

I doubt very much there will be a rights issue. Debt is secured and being reduced by over 400 million a year, probably more. You can't reintroduce a dividend and then pay for it with a share dilution, that wouldn't go down well at all.

There is clear evidence that the turnaround is working. The mention of sequential improvement in revenue suggests an improving trend. The covid hit is over and probably now a source of increased demand for digital products. Think I read it has increased demand by the equivalent of 5 years growth; plus 90% of mcro's staff were working from home rapidly reducing costs and improving margins.

You pay your money and takes your chance but I'd be very surprised if management say their turnaround strategy isn't working. The AWS deal benefits both partners imo. Good deals always do. A material impact on revenue coming soon as a result.

We'll get the appointment of a new cfo soon. Hopefully a big hitter with lots of cred in the city.

[pikemanspike] 10/5/2021 16:40

The writedown last time came as a bit of a surprise, given the profits, and then the CFO left. I wondered if the writedown was a compromise between the ceo and the cfo, and perhaps the cfo wanted to do more, couldn't get his way and quit. The 'doing more' part, I imagine to be a rights issue. The debt is big, though easily serviced by current earnings, but earnings are declining.

I know there's a turnaround plan, but we haven't seen evidence yet that the turnaround is having an impact on earnings, and possibly it won't until all of the transformational elements are in place. But what if the decline continues and outpaces MCRO's ability to pay down the debt? As it stands, it looks as though the management team are managing decline, and I've been invested in a company before that had a turnaround plan which never worked.

Now, while the shareprice has some weight (not much though, compared with recent history) might be the best time to launch a rights issue and cut the debt in half to provide more confidence that the rest can be paid down without difficulty. If the old CFO's objection was about the debt level and the method to tackle it, the new cfo should already be onside with the ceo's point of view (if any of my surmising here is close to the truth) and so a rights issue should not be on the horizon, but perhaps there is growing pressure from lenders. Possibly there is pressure that will be hard to resist.

If the AWS and Snowflake deals are actually creating positive earnings, this will possibly be a moot argument, but one of the things which struck me about the AWS deal was that it required no investment or action from AWS. If mcro earns from AWS, AWS gets 5% of the business as a gift/payoff, quid pro quo or however you want to put it. But AWS has no skin in that particular game. All of the giving is on the mcro side (and investors get a small dilution within a rising shareprice - hopefully!).

All of this, imv, makes the next set of numbers critical. If profit decline has stopped, the share price will rocket, obviously. If it is continuing, we could go even lower. I'd been long from 340p and have top sliced, so I'll be a buyer if the numbers look good, but right now I'm wondering what's going on with the management team and the business, so am in 'watching and waiting' mode with slightly reduced exposure.

[purchaseatthetop] 09/5/2021 18:13

and all those conversations above explain why the share price is still 500pish and not 1,500p!

The historical recent bad performance, uncertainty of the change program, still falling earnings, debt all mean the market perceives many threats to the company.

I see it as a fallen angel (like ITX, AGL, ENET, STX) where previous shareholders have paid the price for the collapsed share price and now the upside is vast as the technology and good management deliver growth and rapid share price rise. By taking a basket of these fallen angels then if one fails to deliver (which is likely) the massive over performance of the others still delivers super-normal portfolio returns. ITX, ENET, AGL have all 2 to 4 bagged, STX is about to rise and MCRO having doubled is about to skyrocket IMO. But it is only a % of my portfolio and I am aware that sh*t happens.

I will find out on 19/5/21 (date I think the update will arrive) whether my bets have all delivered and portfolio is a full house. Good luck to all and I think we have good news coming.

[dr knowledge] 09/5/2021 15:15

@Mo123 - interesting article, thanks for posting. Interesting also to note that in the same piece, seeking alpha cite AWS as a major threat to Snowlfake, the upside for us being that we are in bed with both. ;-)

" AWS and Intelligent Cloud (which Azure is a part of) ran operating margins of 30.8% and 42.5% respectively in the recent quarterly results. Given that the cloud divisions of these tech titans had been driving their respective groups' operating performance, Snowflake may find itself in for a very tough fight if AWS, Azure and GCP decides to create impediments through capabilities limitation, unfavourable pricing, competitive products bundling among others, so that they can effectively stymie Snowflake's growth as a key competitor. Among these 3 tech titans, AWS remains the most important threat as Snowflake runs the majority of its solutions on the AWS cloud"

[p1nkfish] 09/5/2021 09:15

Money flow matters and if it doesn't want to flow here due to other external factors that is all that will count.

[stoxx67] 09/5/2021 08:33

:) ..like the black swan metaphor

this update is very important , other results in the software/it services sector have been strong, no reason why Microfocus should not have made headway.

[stoxx67] 09/5/2021 06:28

take your point garth, its all about sentiment and the "signal" to market participants.

i dont think foregoing the divi is an option.

not good practice to bring it pack onr qtr then cut it the next. that will not happen, sends the wrong signal IMO.

we do not have long to wait to be apprised of the state of play.

[garth] 09/5/2021 05:44

Personally I think the cashflow number will be just as important as turnover along with confirmation that debt is being tackled faster than expected. If concerns over rising interest rates in medium term come to fruition then leverage becomes a bigger drag on the share price here.

Now, positives on AWS contracts will mitigate some of that in the years ahead, all being well, but I still want to see it heading down. And while a divi would be nice I would rather forgo divi now for more down the line - because if the debt goes down I will get at least a divi's worth of capital return in the market up-valuing the company.

Swings and roundabouts?

G.

[planit2] 08/5/2021 20:02

Roch, I could work it another way, I know this is a more optimistic outlook but you can look at deterioration each half rather than each year
H2 2019 was 2.1% higher turnover than H1 2019
H2 2020 was 3.5% higher than H1 2020
There was a turnover improvement to H2 2020 rather than a further sales decline.

Working off these figures you could conclude that H1 2021 will be 1% higher turnover than H1 2020 if the performance of H2 2020 is repeated.
If MCRO manage a further improvement as the Covid problems clear and you add in a bit of improvement from Snowflake and AWS, then you could quite easily get a turnover increase vs last year.