shares fell by more than 12 per cent as analysts warned that its new US$2.1-billion plan to buy the U.K. software company Micro Focus International PLC could weigh on its future performance.
Both companies offer business-to-business software increasingly delivered through the cloud, though their customer base has little overlap. Open Text’s chief executive officer Mark Barrenechea said in a Thursday conference call that his company could help Micro Focus’s business lines return to growth, though his comments were met with some skepticism.
At Royal Bank of Canada Capital Markets, anaylst Paul Treiber was more upbeat, maintaining an “outperform” rating and highlighting Open Text’s long history of growth through acquisitions: “If Open Text successfully integrates Micro Focus like previous acquisitions, we believe the acquisition will create meaningful shareholder value.” But the target company’s declining revenue, he warned, “may restrain” Open Text’s valuation.
Yet another over-hyped Canadian business success story!
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