Micro Focus's share price has been hit hard following news of falling revenues in HPE's software division, which the UK firm is buying from the US giant.
Although the company's plans to acquire HPE's software business was announced last September, this is the first time its shares have been affected negatively - its stock price fell by more than 5%. This was down to HPE's software business declining 10% - mostly due to licensing and sales decreases - in the quarter up until April 2017.
However, the share price is still a third up over levels back in September 2016 when its intentions to buy HPE software were first revealed.
"We are encouraged by the early progress that HPE Software's management are making on implementing operational efficiencies and the speed of change in the business," Micro Focus chief executive Kevin Loosemore said. "Whilst the short-term decline in licence is disappointing it is not unusual given the level of change being undertaken."
The company's business has been built upon buying failing software companies, improving profitability by transforming legacy software through cost-cutting, which in turn, boosts profit margins.
To try and soften the blow, Micro Focus said it had restructured its debt to save $17 million and announced a $500 million cash return, which it hopes will go some way to rebuilding confidence.
Micro Focus is set to complete its acquisition of HPE software by September this year. It explained it had already received all the required regulatory approvals needed for the acquisition to go ahead and only needed a shareholder meeting to ensure everyone was OK with the terms of the deal before making it official.
