Infrastructure software firm Micro Focus (MCRO) has announced a commercial deal with Amazon Web Services (AWS), the world's leading cloud enabler.

The agreement will see the pair work together to help large organisations with to modernise their applications and allow to make the jump into the AWS Cloud ecosystem.

ROUTE TO THE CLOUD

This is big news for the UK company and investors were all over Micro Focus stock in morning trading, sending the share price surging 17% to 510.6p, pushing the value of the FTSE 250 business beyond £2 billion. But investors haven't seen anything yet, if the real value of the AWS deal can be successfully tapped.

AWS is clearly setting its sights on public sector organisations and big corporates juggling large and legacy IT stacks that have been built-up and bolted together over years into unwieldy monsters. Think banks and other financial institutions, or welfare benefits departments, for example.

This is an open invitation to join the cloud party, that by using the IT modernisation tools of Micro Focus, large organisations with complex technology needs can be put on the road to AWS applications and the benefits that cloud implies; faster, cheaper and more flexible applications designed for today's digital world.

HUGE REVENUE SCOPE

That Micro Focus has issued warrants to the tech giant’s investment arm to subscribe for up to 15 million shares at 446.6p each is also telling. These warrants will only be triggered in full if AWS is able to put meaningful business Micro Focus' way, or 'deliver a material impact' on revenues.

Material often means 10% or more in City guidance speak, so investors can probably expect a minimum of $300 million, based on last year's $3 billion total revenue, and quite possibly a lot more.

'The modernization of mainframe applications and workloads into cloud environments is increasingly becoming an imperative in the digital transformation programmes of large enterprises worldwide, and this collaboration has the potential to drive new customer adoption and growth within our Application Modernisation and Connectivity (AMC) product group for an extended period', said Micro Focus chief executive, Stephen Murdoch.

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Issue Date: 03 Mar 2021