INTERVIEW-Micro Focus sees upside in financial market turmoil

LONDON, Sept 24, Sep 24, 2008 (Reuters via COMTEX) -- MCFUY | Quote | Chart | News | PowerRating -- British software company Micro Focus International said consolidation in the financial sector was driving demand for its IT modernisation services, as it reiterated its double-digit revenue growth target.

Chief Financial Officer Nick Bray said companies involved in M&A activity, such as Lloyds TSB in its planned takeover of HBOS, had to get their legacy IT systems to talk to each other, which is where Micro Focus can step in.

"One of our fastest growing regions is Italy, where we have had many sales into the consolidating financial sector," he said in an interview on Wednesday.

Micro Focus was able to assess which applications were most efficient and which could be modernised, Chief Executive Stephen Kelly said, citing Barclays move into South Africa by buying a majority stake in Absa in 2005 as an example.

But across the corporate sector, from retailers to airlines, companies were recognising the value of upgrading existing systems rather than buying packages from providers like SAP or sending software to India for rewrites, Kelly said.

"Consolidation is one trigger, but the savings are relevant in any corporate environment," he said. "In these colder winds, companies are more focused on taking costs out of the business."

Major corporations spend at least $1 billion a year on IT, of which 80 percent is spent on routine operations, he said. For one major corporation, Micro Focus was able to cut the spend on "keeping the lights on" by more than half, he said.

The strength of demand meant the group was confident in reiterating its double-digit organic growth at constant currency target, while maintaining its earnings before interest, tax, depreciation and amortisation margin around 38 percent.

"Last year, the United States was in a tougher place at the macro-economic level and it had our fastest overall revenue growth (at 20.4 percent)," Kelly said.

"Coming into this year we had double-digit growth in our biggest geography. We have our foot on the gas."

(Editing by Mike Elliott) Keywords: MICRO FOCUS/ tf.TFN-Europe_newsdesk@thomsonreuters.com jlw

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