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Micro Focus Issues  (Updated March 22, 2018.)

This topic is discussed on the HPAA's Transition Forum.  Confidential email for corrections or comments: info@hpalumni.org

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Micro Focus "Seattle SpinCo" US tax liability on 2017 return. Hewlett Packard Enterprise shareholders received shares in a UK company -- Micro Focus -- in the spinoff of HPE's software business. Due to unique circumstances involving a non-US corporation, HPE indicates that this transaction is taxable for US shareholders -- even if no Micro Focus stock has been sold.  3. Micro Focus tax

Contacts: Micro Focus UK and US Headquarters (scroll down)  Other countries: https://www.microfocus.com/about/contact/

Summary of Micro Focus business and employment outlook: Expects to increase revenue for the HPE products from $185K/employee to $273K/employee -- counting "all full time employees, contractors, a headcount transfer from the HPE Global Marketing Team and estimates for staff transferring from central corporate functions." New CEO of Micro Focus was former COO of HPE. Pre-merger 4,500 employees. HPES added roughly 14,000 employees.

"Since the interim results on 8 January 2018, the rate of year-on-year revenue decline has been greater than anticipated." CFO and CEO replaced.  
--March 19 announcement 

Pre-spinoff diagram of Micro Focus product history, including the product lines being acquired from HPE -- Peregrine, Mercury, Opsware, Tower, ArcSight, Vertica, Autonomy -- with the original HP acquisition price for each. MicroFocus-HPES Portfolio 4/1/17

"Transaction valued at approximately $8.8 billion, including 50.1% ownership of the new combined company by HPE shareholders and a $2.5 billion cash payment to HPE." --original Sept 7, 2016 HPE announcement

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Fortune article summarizing breakup of Hewlett-Packard into HP Inc, Hewlett Packard Enterprise, DXC, and Micro Focus.

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For those transitioning to Micro Focus:

- 401(k) Members report that the next 401(k) match payout will be on the date of their transition.
- You are classified as a former employee or retiree of HPE. Treated as though you left HPE to join any other company. Entitled to whatever retiree coverage you qualified for at the time you left HPE. (If qualified for the "Pre-2003" retirement program, classified as a retiree of HPE but medical benefits administered by HPI.)


About the company's business strategy and employment outlook...

Specializes in "sticky" mature corporate infrastructure software with recurring license and maintenance revenue.

To subscribe to information from Micro Focus:

http://investors.microfocus.com/en/site-services/email-alert.aspx

 

January 8, 2018:

"Severance and legal costs of $9.8m for the six months ended 31 October 2017 (2016: $4.0m) relate mostly to termination costs for HPE Software employees after acquisition."

"Reported revenues in the six months to 31 October 2017 were $1,234.5m ...with HPE Software contributing $569.8m..."

"Reported revenue growth of $549.8m (80.3%) driven by:
- Acquisition of HPE Software contributed $569.8m;
- SUSE Product Portfolio where reported revenues grew by 11.5% and CCY revenues grew in line with the market for Infrastructure Linux;
- Offset by anticipated declines in the existing Micro Focus Product Portfolio which declined by 6.9%."

Interim Results January 8, 2018

 

July 2017 Micro Focus stock prospectus:

"The Micro Focus Group has more than 4,500 employees in over 90 global locations" (page 4)

"HPE Software had approximately 12,200 regular active employees as of 31 October 2016. Upon Completion, HPE Software’s total headcount will also include certain staff transferring from the HPE Global Marketing Team and central corporate functions of HPE in the Separation. Including these employees, the total headcount for HPE Software would have comprised approximately 16,900 employees as of 31 October 2016." (page 137)

"As part of the 2015 Plan, it is expected up to approximately 2,900 employees will exit Seattle [HPE Software] by the end of 2018. The changes to the workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate." (page 195)

There are country-by-country employee-count breakdowns for Micro Focus and HPE Software on pages 273-276. (For example, in Norway, Micro Focus has 2 employees and HPE Software 10.)

The various stock incentive plans for both companies are detailed on pages 293-304.

Micro Focus July 2017 Stock Prospectus

 

July 2017 Micro Focus analyst presentation:

Former Autonomy products less than 10% of HPE Software revenues, mainly SaaS (page 8)

Organization chart -- color-coded as to whether from HPE or Micro Focus (page 10)

HPE Software Integration Planning Update (page 28)  No mention of HPE-related headcount.

Micro Focus Analyst Presentation 

 

July 2017 Micro Focus financial results:

"In September 2016 the Company announced it had agreed with Hewlett Packard Enterprises [sic] ("HPE") to merge with the software business assets of HPE ("HPE Software") by way of merger with a wholly owned subsidiary of HPE. The transaction is expected to complete at the beginning of September this year with the listing of consideration shares on the London Stock Exchange ("LSE") and the simultaneous listing of the American Depositary Shares ("ADS") on the New York Stock Exchange ("NYSE")...

"Mergers and acquisitions continue to be a key component of our strategy. Whilst the key strategic announcement in the period was the HPE Software transaction we also completed the acquisitions of Serena, GWAVA Inc., OpenATTIC, and the OpenStack IaaS and Cloud Foundry PaaS talent and technology assets. Over the last six years we have completed and successfully integrated 10 acquisitions and on completion of the HPE Software transaction will have increased the revenue of the business approximately 10 fold since 2011.

"John Schultz, the Executive Vice President and General Counsel of HPE, will join the board... Chris Hsu [former HPE COO], who will become CEO of Micro Focus upon Completion, will join the board at that time.

--results for the year ended 30 April 2017 (Published 12 July 2017)
Micro Focus results
 

Find out what Micro Focus is telling Wall Street about employment prospects and strategic issues that will affect your career. You can read the most recent announcements at http://investors.microfocus.com  and Micro Focus Presentations

Key comments...

The company's strategy over the past nine years has been to acquire software product lines -- such as Novell, Attachmate, Borland, and Compuware -- which have "lost value chasing revenue growth."

Diagram of Micro Focus product history, including the product lines being acquired from HPE -- Peregrine, Mercury, Opsware, Tower, ArcSight, Vertica, Autonomy -- with the original HP acquisition price for each. MicroFocus-HPES Portfolio 4/1/17

"Micro Focus believes it is possible to improve the margin delivered by HPE Software's mature software assets to Micro Focus’ level by Apr-2021."

The company expects to increase revenue for the HPE products from $185K/employee to $273K/employee, counting "all full time employees, contractors, a headcount transfer from the HPE Global Marketing Team and estimates for staff transferring from central corporate functions." (page 27)

Micro Focus Lender Presentation  April 4, 2017

 

"We identified areas of the business that were not aligned with our go-forward strategy... Application Delivery Management, Big Data, Enterprise Security, Information Management & Governance and IT Operations Management businesses... Micro Focus’s approach to managing both growing and mature software assets will ensure higher levels of investment in growth areas like big data analytics and security, while maintaining a stable platform for mission-critical software products that customers rely on...
"For employees, Micro Focus’s approach will mean each product line will have a clear and important role in the overall company performance, and employees will have a high level of clarity on the strategy for their organization. It also means employees will get to work on long-term, customer-focused projects -- and the software technology that they love."
Meg Whitman

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