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Micro Focus International Stock Pops on Amazon Partnership

By Jon Quast - Dec 3, 2020 at 3:30PM

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Micro Focus is one of four technology partners selected by Amazon for cloud migration.

What happened

Shares of Micro Focus International ( MFGP 3.50% ) popped on Thursday after Amazon ( AMZN 3.41% ) gave the company its full vote of confidence for helping businesses migrate to the cloud. As of 3 p.m. EST, Micro Focus stock was up 17%, but had traded as much as 25% higher earlier in the session.

So what

In an Amazon Web Services (AWS) blog post, Amazon notes that 70% of Fortune 500 companies still run their businesses on their own mainframes. The problem is it's expensive to maintain and upgrade your own equipment, providing incentive to migrate computing power to the cloud. This, of course, sounds easy. But when you're talking about a massive enterprise, cloud migration can be complicated.

A red rocket prepares to fly over a rising bar chart.

Image source: Getty Images.

Therefore, Amazon has handpicked several businesses with the chops to help companies move their operations onto AWS. Micro Focus was listed as one of the four pre-qualified technology partners. Amazon noted how Micro Focus had already helped Kmart Australia get on AWS and believes it's up to the task to help others.

Now what

Micro Focus is a small-cap stock. Therefore, it doesn't take much to get it to pop -- much less when Amazon gives you a shoutout. While there's no indication yet for what this means for Micro Focus' revenue going forward, it surely won't hurt. Considering the company posted a 10% year-over-year decline in revenue for fiscal 2020, this might be a catalyst to help it return to growth.

However, investors should note that Amazon is looking to add more technology partners over time. Therefore, Micro Focus won't enjoy its one-of-four status forever.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Micro Focus International plc Stock Quote
Micro Focus International plc
$4.73 (3.50%) $0.16, Inc. Stock Quote, Inc.
$3,544.35 (3.41%) $116.98

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