Shares in British software maker Micro Focus International plc lost more than half of their value after the company revealed that its year-on-year revenue decline had been worse than expected and CEO Chris Hsu would step down.
Micro Focus said revenue has fallen more than anticipated since its interim results on Jan. 8. The company is now expecting revenue to drop between 6% and 9% over the 12 months ending Oct. 31, compared to a previous projection of a 2% to 4% decline. It is also expecting revenue to shrink 9% to 12% in the six months ending April 30.
The company attributed the bigger estimated revenue decline to the lower-than-expected license income and "one-off transitional effects" of its $8.8 billion acquisition of Hewlett Packard Enterprise Co.'s software business in September 2017. These effects include issues related to the implementation of a new IT system, sales execution issues and loss of sales staff.
Hsu, who was appointed CEO in January 2017, will resign immediately to pursue another opportunity, Micro Focus said. He will be replaced by COO Stephen Murdoch, who will also join the board with immediate effect.
Mirco Focus shares were down 51.90% to 906.40 pence at around 1:14 p.m. in London.
The board believes that "the fundamental thesis of the HPE software acquisition remains intact" despite integration issues, Micro Focus said.
"We remain confident in Micro Focus' strategy whilst recognizing that operational issues have led to a disappointing short term performance and outlook," said Micro Focus International Executive Chairman Kevin Loosemore.
Micro Focus said the progress made in its cost-reduction program is expected to mitigate the earnings impact of the projected revenue drop.