Micro Focus snaps up US rival for $73m

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Micro Focus International highlighted the resilience of corporate spending on software in the US as it raised its full-year guidance again and snapped up a US rival for $73.3m (£37m).

The group, whose software allows corporations to upgrade legacy IT systems, raised its revenue guidance for the year to April 30 to $226m- $228m after a strong fourth quarter.

Micro Focus raised its guidance in February when it forecast second-half turnover broadly similar to its strong first-half performance of $108.9m – implying a full-year outcome of about $218m.

Stephen Kelly, chief executive, said capital expenditure budgets had come under pressure in investment banking but had been more than offset by strength in government, defence and retail markets, with clients from Boeing to Tesco.

Although Micro Focus benefited from favourable foreign-exchange rates, it said underlying organic growth, at constant currency, would be about 15 per cent. In spite of market worries about an economic slowdown, “the US is still a growing market and we see further expansion there”, Mr Kelly said.

The $7.20-a-share deal in cash for NetManage, a Nasdaq-listed rival, is the company’s second foray into the US market after the purchase of AcuCorp for $40m in May last year. The price represents a 73 per cent premium to NetManage’s prevailing market price while NetManage also has $25m cash on its balance sheet.

NetManage, which saw a deal with Rocket Software this year scuppered by the credit crunch, operates at break-even on sales of £36m. Micro Focus will take a $10m restructuring charge as it removes duplicate costs in the business.

Charles Brennan, an analyst at ABN Amro, said it expected the deal to be earnings enhancing in the year to April 2009.

The shares closed up 18¼p at 252p.

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