Shares in Micro Focus plummeted on Monday after the UK tech company warned of falling sales and said its CEO was leaving after six months on the job.
A dramatic stock decline of 45% wiped £4.4 billion ($6.3 billion) off the company’s market value in London. Shares had crashed as much as 59% in early trading.
The firm said that it was struggling to integrate the software division of Hewlett-Packard Enterprise, which it purchased last year for $8.8 billion. It said the rocky transition had caused salespeople to quit.
Micro Focus, which helps clients manage their software systems and prevent cyberattacks, said it expects sales to drop by as much as 9% during the current financial year. It had previously forecast a decline of 2% to 4%.
The company also said that chief executive Chris Hsu, who joined from Hewlett-Packard Enterprise, would be leaving immediately to “spend more time with his family and pursue another opportunity.”
Micro Focus said its current chief operating officer, Stephen Murdoch, would take over as CEO.
There were already some warning signs before Monday’s crash.
Paul Moran, an analyst at Northern Trust Capital Markets, cut his outlook for the company last week, saying it was lagging competitors in the critical area of artificial intelligence.
He said that Micro Focus had built a reputation for buying companies, then cutting costs and improving their profitability. But it had fallen short on innovative ideas and growth, two key factors for most tech firms.
Research firm Gartner had another critique in 2016: It said that Micro Focus had focused too much on “aggressive” sales tactics such as upgrade charges that hurt customer satisfaction. Its corporate clients include Comcast, BMW, AIG and Siemens.
Micro Focus did not immediately respond to a request for comment on Monday.
The Micro Focus deal is the latest in a series of problematic transactions involving Hewlett-Packard, which split into two companies — HP Inc and Hewlett Packard Enterprise — in 2015.
Hewlett-Packard’s $11 billion acquisition of software maker Autonomy in 2011 turned into a disaster. HP ended up writing down nearly $9 billion of Autonomy’s value, claiming the UK company had falsified its financial statements. (Autonomy founder Mike Lynch has always denied the claims.) Some Autonomy assets were later incorporated into the software division purchased by Micro Focus.
Hewlett-Packard’s $19 billion purchase of Compaq in 2002 is considered one of the worst in the history of tech.
