Dead cat first bounce was around 14:30 on Monday 1111p. In the morning I had set a limit sell (all) order at 1050 and met on 19/03/2018, 14:11 at 1050.6p . There was a smaller bounce at 8:40 yesterday of 1084 but today's high so far (up to 15:15) is only 1014 though looks like it might go up a bit more today.
I am glad I have sold out of MCRO but not happy about my CG loss of around 52% (my overall loss on MCRO including consolidation, top slice profit taking and dividends on my in MCRO was 30.6% so IMO not too terrible.
I remember an interview with a fund manager who always sold straight away holdings in fund, of any company that had a profit warning. His argument was one profit warning commonly followed by two more with SP falling at each warning. Does not always happen that way but more often than is comfortable to hold unless you have very good reason to believe a recovery will take place fairly soon (say under 2 years). I will add PI's have advantage that their jobs not on the line if they under perform over 3 months so can sit on losses for longer.
Unfortunately these small (affordable) purchases make me even more concerned about what further bad news might be around the corner. These guys are well salaried and would not hesitate to "fill their boots" if they thought this was a real bargain. Steer clear for 6 months and wait and see is my advice.
"Analysists" reiterated their 'overweight' recommendation and 1,500p target price.
"Further management change is unsettling, but the debate has seemingly moved to the health of the balance sheet. This, for us, is a step too far and despite the challenges we believe MF remains a highly profitable and cash-generative business," they said.
Deutsche Bank, on the other hand, appeared to be rather less positive, slashing its target price for the shares from 2,800p to 780p.
"Sales at this computer giant have crashed spectacularly, but can it bounce back? Alistair Strang looks for any bugs in the system.Written 19th March 23:49Micro Focus International (LSE:MCRO)Every now and then, red flags come from the most ..."
" MICRO FOCUS INTERNATIONAL (LSE:MCRO) Every now and then, Red Flags come from the most unlikely sources. This lot, with the acronym MFI, set themselves up for calamity fairly early, if the defunct junk furniture behemoth was anything to go by. ..."
Just shows you not to believe a word the city experts say.
I suspect it shows their ignorance of the realities of running a company whereas anyone whose done a proper job for a living would know that you cant quadruple the size of a company without utter chaos ensuing.
The balance sheet is basically debt intangibles and goodwill which is ok if the earnings come through as expected, but that is now a doubt.
"It seems as if every week now there is another corporate disaster".
Unfortunately i find very few truthful people about these days or many who have values which they stand by.
Why would this not be reflected in the corporate world.
Its so sad and makes this game even more difficult.
There are 2 ways of valuing software companies. You can value them on a PE basis in which case MCRO now deserves to sell on a much lower multiple of lower projected earnings
Or you can value the company on a discounted cash flow basis less repayment of the debt. As earnings are declining and the company has $4 billion of debt then on this basis the shares have potentially further to fall.
I'm not at all surprised at the share price reaction. They could not even say in the trading statement if the chief executive resigned or was fired. The institutions will be fuming and will demand the chairman steps down as well. It seems as if every week now there is another corporate disaster.
""""Micro Focus said licence income was lower than expected as a result of a number of factors that "management believe to be largely one-off transitional effects of the combination with HPE software, rather than underlying issues with the end market or the product portfolios", including IT implementation affecting sales teams, high attrition of salespeople "due to both integration and system related issues", disruption of ex HPE global customer accounts and "continued sales execution issues" in North America."""
Is it a case of a number of issues or have they completely been wrong footed by a large and possibly smart organisation that offloaded this huge division in the nick of time?
At 873 as I type, this is either a bargain, or is this an existential issue that could take the company all the way down? Don't know enough to say either way.
Better have a look at the numbers - are they sitting on a massive debt now?
Cursing self for not selling in January (see my earlier posts) all my instincts were telling me this is a company in trouble, in a troubled sector that added to its problems with over ambitious growth by dubious acquisition of HPE. I think there is a good chance of a dead cat bounce then I too will cut my losses. Monday morning blues :-(
Sympathies with any holders. That is a horrific statement and poorly drafted. They have attempted to disguise the acceleration in the decline since the announcement of the interims and blamed a series of one-offs. The City won't give the Company the benefit of the doubt and will view the acquisition of HPE as a disaster.
I'd expect the shares to trade under £10 at some point today.
Has dropped a lot. Not quite convinced abut these (only acquired via my HP holding), but a decent divi, well covered, and the prospect of capital growth (not least when the £ tanks again, as I'm expecting it will), has made me double my holding. (it was a case of double or quits, and I should really have quit 6 months ago, so it goes).
Consensus stronger, was Sell now Hold. In the end that's what I've done so I hope this weeks modest uptrend builds momentum. SP did rise a little faster than FTSE 100 last week which is a good sign but I cannot see SP recovering for a long time from big fall on 8 Jan, still 11.7% down on 11 Jan (after dead cat bounce) from closing price on Fri 5 Jan. SP now -18% on 5 Jan closing SP. 23% down on all time closing high on 21 Nov 2017 of 2739.
I have not sold yet but have a limit order on to sell all at 2350. Very unlikely to be filled today and as my dealing platform does not support enduring limit orders will have to remember to put it on again this evening. I am concerned that they may end with a lot of service support contracts that end up costing them more than they have budgeted for.
Wish I had put more money into XPP instead of MCRO.
I would think there must be a lot of opportunity in supporting legacy systems, which are likely to increase in number as time goes by, and there must be worldwide application and opportunity as well. Dividend is growing, to be covered twice by earnings and HPE integration not a disaster anyway. I would think hold at these levels.
Le-Boom, "Surely you should ride the waves and get out at + £25 and wait for sub £23 again"
Not at all sure SP will repeat past patterns. I bought MCRO with part of the cash from ARM take over wanting some exposure to tech sector. I have not got a lot of faith however in MCRO business model supporting legacy software. Support companies in general do not seem to do very well. They can win contracts but end up making little profit or even a loss. I do not see them as a long term growth stock.
Glad to see at least a dead cat bounce today in SP.
I used to be a shareholder but bailed out because of the risks with the HPE acquisition.
Anyone investing would be well advised to read the narrative sections of the report where they openly discuss the integration problems they are having with their previous acquisitions and state that they are still unresolved.
This is before they have tried to integrate HPE.
In corporate news, software group Micro Focus tumbled as its first-half results failed to impress.
Spreadex analyst Connor Campbell said: "Micro Focus actually posted some attention-grabbing numbers, namely a 28.7% surge in revenue to $145.7m and an 80.3% jump in revenue to $1.23bn. Yet the fact that revenue dropped 2.9% year-on-year to $664.7m when the effects of its HPE Software merger were stripped out, alongside its group results coming in at the bottom end of expectations, soured investors on the tech firm, who sent the stock to a four-month low."
Oh cashpharma, you virtue-signalling success-envying paragon of perfection. Gorged on sour grapes you loathe the people who work hard to be successful. So what exactly is it that you do to make money? Gamble on the stockmarket and sit on the moral high ground of your winnings gazing down at people who are worth more than you? If you pop down to Brighton today you can meet your soul-mates, Corbyn, McDonnell and McCluskey. You will be in your element.
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