Cobol specialist Micro Focus Plc, has seen consistent growth for the past five years, and reckons that things can only get better. According to chairman Paul O’Grady, not only does the Newbury, Berkshire-based company have virtually no competition, but there is also a massive market out there for its personal computer-based application development tools. Less […]
Cobol specialist Micro Focus Plc, has seen consistent growth for the past five years, and reckons that things can only get better. According to chairman Paul O’Grady, not only does the Newbury, Berkshire-based company have virtually no competition, but there is also a massive market out there for its personal computer-based application development tools. Less than 10% of Cobol programmers use the company’s products, he says, because the remaining 90% still use mainframe terminals. Micro Focus believes that the way ahead is to target vertical markets. And O’Grady says that if the group can’t develop suitable products itself, it may well consider going down the path of strategic acquisition. He also reckons he can cash in on, what he calls the fragmented operating systems market. Micro Focus’s portable technology is dependent neither on operating system or microprocessor, thus offering users a migration path from the mainframe to new technologies. During the year, Micro Focus released Cobol 3, which O’Grady claims lays the foundations for moving into such new strategic areas, as client-server technology, as well as interoperability across multiple operating systems and graphical user interfaces. The group also launched an object-oriented programming tool, OO Option for Workbench, in September – its first such offering in this arena. For the year ending January 31, pre-tax profits rose 22.7% to UKP67.7m, while turnover grew 22.4% to UKP67.7m. The sharp fall in the value of sterling relative to the dollar and the principal European currencies in the second half led to pre-tax exchange rate gains on operational transactions of UKP600,000, while the effect of exchange rate movements during the year on turnover added a further UKP800,000 to pre-tax profits. Because the group now generates 57% of revenues in the US and listed its American Depository Receipts on the NASDAQ National Market System in May 1992, it now reports its results in both dollars and sterling. But the board is currently considering issuing its figures primarily in dollars in both the US and UK in future. Micro Focus saw turnover generated from its direct sales business grow 25% in dollar terms compared with 24% the year before. This now comprises 80% of business, and O’Grady is intent on growing this still further.
Small and medium sized accounts
Maintenance makes up a significant part of this, and in 1992 accounted for 21% of all direct sales. O’Grady reckons this may well represent a potential stream of recurring revenue from existing customers. The company has also focussed its attention on small and medium-sized corporate accounts in the US and Europe because it does not want to become reliant on one or two big contracts. Direct business in Europe continued to grow, slightly ahead of the US even, which saw wide variations in performance from state to state. O’Grady reckons this was a reflection of their different underlying economic fortunes. Still, the fastest-growing market is international distribution, he said, particularly in Europe. OEM sales were described by O’Grady as the more mature side of the business, and in fact was originally its core activity. Here, turnover increased 6% in dollar terms, ahead of expectations. The group is not actively growing this side of the business, intending rather to secure revenues at existing levels. Unit shipments were particularly strong in Europe, while revenues in Japan were ‘lumpy’ – Japan sells exlusively to OEM customers, which means it is entirely dependant on how computer companies are performing themselves. As the recession starts to take effect in the region, O’Grady said, firms have begun delaying the introduction of new products, which has rebounded on sales. Major contract renewals during the year include Data General Corp, Motorola Computer Systems Inc, Fujitsu Ltd, Hitachi Ltd, NCR Corp in Japan, Siemens Nixdorf Informationssysteme AG and Compagnie des Machines Bull SA. New deals were struck with Apple Computer Inc for its System 7 and A/UX environments, and Digital Equipment Corp for Alpha and o
ther environments. O’Grady claims that the group now has products that can run on virtually all microcomputer and minicomputer hardware. To make more efficient use of its resources, Micro Focus has now merged into a single force its sales teams for both direct and OEM activities as well as its product and business development operations.