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OpenText completes Micro Focus buy, CEO says bye to 8% of workforce

Here's your new desk, phone, security card, and an unpleasant missive for some

OpenText marked the completion of its $6bn purchase of Micro Focus by setting out plans to shed 8 percent of the combined workforce, equating to circa 2,000 people joining the dole queue.

The all-cash offer was tabled in August and after passing the shareholder sniff test, the sale was finalized yesterday.

“I would like to welcome Micro Focus customers, partners and employees to OpenText,” said CEO and CTO Mark Barrenechea in a statement. “Digital life is life, and with Micro Focus’ great products and talent, we will help organizations of all sizes accelerate their digital transformation.”

Another sort of transformation awaits thousands of staff at the business, with a spokesperson for OpenText saying that it making some $400 million in “cost synergies”. Presumably there’ll be some role duplication in back office and other areas, but it's not clear how deep the cuts will go.

“The combined company will balance and reduce the workforce by approximately 8 percent due to the acquisition of Micro Focus which officially closed yesterday,” the OpenText rep told us.

As of August, OpenText employed around 14,800 staff, around half in the Americas, 18 percent in EMEA and the remainder in Asia Pacific, according to the 2022 Annual Report. Micro Focus had 11,355 people on the payroll in 2021, its latest Annual Report says.

OpenText didn’t agree to a request to provide the latest headcount numbers.

The spokesperson instead told us it has a “structured and disciplined approach to M&A” and “the last six months of planning have led to a defined integration path to deliver committed outcomes that will position the company to win the Information Management market”.

OpenText is currently in its financial quiet period and said it will provide more details about the purchase following financial results scheduled to be published tomorrow.

When it announced the intention to buy Micro Focus in August, the Canadian information management specialist said the purchase would give the merged business greater scale and a total addressable market of $170 billion.

In Micro Focus though, OpenText is buying a hodgepodge of software assets that have hardly been firing on all cylinders. We've often referred to Micro Focus as a graveyard for legacy software businesses.

It was founded in 1976 and specialized in bringing COBOL to non-mainframe environments; floated on the London Stock Exchange in 2005; and embarked on an acquisition spree soon after, with conquests including Borland, Attachmate Group, and HPE’s Software biz. The last one, which was inordinately bigger than Micro Focus, and caused digestive issues that are taking years to correct.

Execs at the company have worked hard to turnaround the organization, but the last set of results suggest that remains a work in progress. The redundancies process being opened by OpenText might cut some costs and improve profits, but they won’t deal with any systemic challenges Micro Focus already faces, such as how rapidly it can convert customers into software subscribers.

Good luck to all involved. ®

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