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Why Micro Focus International Stock Was Slammed Thursday

By Daniel Sparks – Aug 29, 2019 at 12:23PM

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Investors were spooked by the infrastructure software company's lowered guidance.

What happened

Shares of infrastructure software company Micro Focus International (MFGP -0.35%) were slammed on Thursday, declining about 32% as of 11:50 a.m. EDT.

The tech stock's decline comes after the company updated its guidance for fiscal year 2019, which ends on Oct. 31. Micro Focus lowered its outlook for revenue during the period. 

A chalkboard sketch of a chart showing a stock price falling

Image source: Getty Images.

So what

Management said that it no longer expects to meet its guidance for constant-currency revenue to decline 4% to 6% year over year for the 12-month period ending Oct. 31, 2019. Instead, management expects constant-currency revenue to fall 6% to 8%.

"Weak sales execution has been compounded by a deteriorating macro environment resulting in more conservatism and longer decision making cycles within our customer base," management said in a press release on Thursday. Management noted it does have "a significant pipeline of business opportunity being pursued," but said it would be difficult to close deals with a meaningful portion of these customers before the fiscal year ends.

Now what

Given this challenging environment, Micro Focus said it is accelerating its strategic review of its business. "This review will focus on what in addition to execution improvements are required to optimise the value of our broad portfolio of products and it will consider a range of strategic, operational and financial alternatives available to the Company," Micro Focus said.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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