The bell tolled long and hard Wednesday as Novell Inc. slashed approximately 900 positions from its workforce to cut costs and streamline its business.
Post reduction, the number of employees worldwide will total approximately
4,600. The company is also writing off certain other assets, and anticipates
taking a pre-tax restructuring charge of between $40 and $50 million in its
fourth fiscal quarter, ending October 31.
The company said it wants to shift its focus to product development as well
as increasing its sales and marketing divisions.
The firm first hinted at lay-offs Aug. 16, when it stated it would attempt
to lower expenses in its fourth fiscal quarter, although analysts last week said they expected as much as 25 percent of the networking firm’s staff to be dispatched.
Such speculation was fueled by a dreary third quarter, when Novell said net income fell to $8.57 million,
or 3 cents a share, from $49.3 million, or 14 cents, in the comparable period a year
earlier. Sales fell 17 percent to $270.0 million from $326.8 million.
In the same
quarter, four business groups were formed to address various Net services
opportunities.
Novell expects to reduce its overall quarterly cost of doing business by
approximately $25 million, beginning in the first fiscal quarter of 2001.
The restructuring is part of management plans to focus the organization on
the Net services market and improve the company’s business performance.
“These actions are intended to improve the business in 2001, as we build the
value of the Novell brand and accelerate deployment of Novell Net services
that support how business is done on the Net,” said Novell Chairman and
Chief Executive Officer Dr. Eric Schmidt.
“Immediate benefit will come with the prospect of better earnings
performance after lowering expenses. The greater objective is returning
Novell to growth, increasing our investments in new Net services, while
maintaining high levels of customer support.”
Alex Benik, carrier convergence infrastructure analyst for Yankee Group, said he was not surprised at the cuts, and noted that Novell had been struggling to plug its own Internet niche fo some time.
Benik said rumors have been swirling that Novell will either undertake a radical reorganization to become more Internetcentric and will embrace more personalization because they “can’t leave an installed base of users stranded — it’s not a viable option,” or they will be snatched up by a larger firm.
Benik noted that although it was speculation, he he could see Sun Microsystems Inc. as the most logical suitor to afford Novell’s lofty price tag.
Novell is a consummate Net services software provider, offering applications
for intranets, extranets; wired to wireless; corporate and public-across
leading operating systems.
