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Novell Pink Slips 1,400 In Restructuring

In the hopes of some day returning to profitability in this sluggish market, networking software maker Novell Inc. Thursday kicked into action plans to restructure and let 1,400 people go, or 19 percent of its workforce, along the way.

The Provo, Utah company, which will be left with 6,000 workers worldwide, is also in the process of writing off other unspecified assets, and anticipates a pre-tax restructuring charge of approximately $55 million.

Novell hopes to consolidate Cambridge Technology Partners, which it acquired last July, considerably. It said the restructuring actions are central to the new solutions focus that Novell is implementing through that purchase. Novell also cited "overall decline in the IT market, the oversupply of IT consulting services capabilities, and expectations that the IT market will be slow to recover in 2002" as reasons for its changes.

Still, with the cuts and reconfigurations, Novell expects to see cost savings of $200 million annually.

"Novell is becoming a more aggressive company, adopting solution delivery and support capabilities across every aspect of our business," said Novell Chairman and Chief Executive Officer Jack Messman. "The actions we are announcing today mean a better structured company, with improved profitability, that's well equipped to make real progress toward our growth objectives."

Messman added that Novell's Net services software continues to be in high demand, which is in line with what many research firms have been saying about the potential for Web services solutions going forward.

"Our plan is to take Novell's Net services software market lead and use it to build broad market adoption of one Net solutions," continued Messman. "Novell's products are squarely in the middle of converging market needs for security, identity management, application integration and innovative Net services across network solutions."

With the glum news, the company aired preliminary fourth quarter revenue estimates of $306 million. Earnings per share is expected to be hit $0.01 per share, on a diluted basis. Non-recurring charges in the company's fourth fiscal quarter are estimated to total over $90 million. Novell will release its official fourth quarter results on Nov. 29.