OpenText slammed after restructuring announcement

Open Text CEO Mark Barrenechea. PI analyst Pardeep Sangha regards Open Text's Q3 as only

Open Text CEO Mark Barrenechea. PI analyst Pardeep Sangha regards Open Text's Q3 as only "slightly positive". Although the company beat consensus estimates, he says, its decline in licensing revenue is troubling. — Open Text CEO Mark Barrenechea.

Shares of OpenText (TSX:OTC) are getting hit today after the company announced a comprehensive restructuring that will reduce the size of its workforce by five per cent.

CEO Mark Barrenechea, whom the company also announced is returning to work after leaving for leukemia treatment, said the move would not impact the Waterloo-based company’s topline.

“Effective immediately, we are announcing a simplification of our business structure around enterprise, information exchange and analytics, as well as a new global technical services organization,” he said. “This structure will allow us to scale as we continue to acquire complementary businesses over time, and will provide additional focus on winning the customer and capturing the lifetime value of that relationship. As a result of the restructuring, we expect to save approximately $50-million in annualized operating expense, accretive to fiscal year 2016 earnings and with little to no impact on revenues.”

OpenText says it will focus on its cloud business strategy to deliver growth. Management says it want to be a leader in the Enterprise Information Management (EIM) space. The company notes that its cloud business now accounts for nearly a third of its overall topline, a number that was zero just three years ago.

OpenText says it will face a pretax restructuring charge of about $25-million, mostly owing to employee severance arrangements and facility expenses. The company yesterday shuffled the deck on its management, parting ways with Jon Hunter, executive vice-president, worldwide field operations, and appointing James McGourlay, senior vice-president, global technical services, and Simon Harrison, senior vice-president, enterprise sales, amongst other appointments.

At press time, shares of OpenText on the TSX were down 13.1% to $51.97.

About The Author / Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

Comment

DD says:

May 25, 2015 at 7:21 am

no no… please don’t use “CEO’s health issues” to create sympathy. It’s looks too bad for company’s reputation. Simple – Stop buying more companies if you don’t know what you are doing with employees or how to use Govt (people’s) money.