Wednesday, 30 September 2009

Micro Focus - full tank, but we need a map!

(By Philip Carnelley, 30 Sep 09, 17:00) A large crowd attended a Micro Focus analyst teach-in earlier this week, keen to catch up after the recent major acquisitions and the loss of CEO Steve Kelly. Confident performances by Chairman Kevin Loosemore, by CTO and Micro Focus 25-year veteran Stuart McGill, and especially CFO Nick Wray – who in many ways sounded as much CEO as CFO – gave the impression they’re hardly missing Kelly. Operationally, perhaps, but we suspect they will feel the loss more acutely on business development.

The focus of the briefing was the impact of the Borland and Compuware deals, which brought the tally to five acquisitions in the past 12 months. Micro Focus claims with its enlarged range to have expanded its addressable market tenfold: from a $600m market opportunity three years ago to upwards of $6bn now – particularly in testing, inside and outside the Cobol arena. Maybe so, but it wasn’t awfully clear how they plan to address it.

Micro Focus’s big challenge now is that, other than in PC Cobol, it’s a smallish player in different sub-segments of a big market, competing with the likes of HP and IBM. And it’s surely fair to ask: if the Borland and Compuware products were also-rans before Micro Focus bought them, why should they be world-beaters now? Micro Focus argues – with some justification – that Borland management just lost the plot, while Compuware had other fish to fry than testing. Fine, but we need proof that new management can do better. First off, we really want to see a product roadmap as to how it will all fit together, and a compelling marketing strategy. We were told the roadmap is still a few weeks away from public consumption.

Management also pointed to a major developing opportunity in IBM mainframe application migration. That said, pundits have been heralding the demise of the mainframe since client/server first emerged 20 years ago and there’s an awful lot of mainframes still out there. Still, Cobol migration is the backbone of Micro Focus’ business, and at current course and speed should serve them well for the next 20 years…

With testing tools to complement the migration product set, Micro Focus should, in theory at least, be able to gain a bigger share of the CIO’s ‘application modernisation’ budget. Longer term, Micro Focus looks to migrating applications to the Cloud as a significant (and trendy) opportunity. We think that’s reasonable, but still some years off even by its own admission. We trust that management will map out a clear course for the immediate future before worrying about the longer term.

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