Novell may make more acquisitions to fill product line

But first half of year will be slow for IT industry as a whole, CEO says

Novell Inc. continues to look at acquisitions to fill its product line, Ron Hovsepian, the company's president and CEO, told reporters in Bangalore, India, today.

The company will look at acquisitions in the areas of open-source software as well as software for data centers and identity management, Hovsepian said.

The company's cash, cash equivalents and short-term investments were $1.1 billion as of Oct. 31, and Novell plans to deploy some of that capital to acquire companies, Hovsepian said.

The acquisitions by Novell in the past 18 months or so have helped promote interoperability and heterogeneous management, he added.

The company announced in March 2008 the completion of its acquisition of PlateSpin Ltd., which provided Novell technology for the movement of workloads between physical and virtual environments across operating systems. Novell is now planning to extend the technology to provide tools to users that will enable them to move workloads from virtual environments to a cloud computing model, Hovsepian said.

Novell also announced in October a definitive agreement to acquire the business service management company Managed Objects Solutions Inc. The acquisition extended Novell's portfolio of data center technologies by adding tools to provide a unified view of all information and workloads, including potentially a cloud environment, Hovsepian said.

Novell plans acquisitions to fill up its product line even as Hovsepian forecast that the first half of this year is likely to be very slow for the IT industry as a whole.

"I think CIOs are going to be reserved in their spending, they are going to be cautious, and then as they start to get into the end of the second quarter, they are going to try to hold off expenses as long as they can," Hovsepian said.

Novell, which is laying off fewer than 100 of its 4,100 employees, does not, however, have plans for further layoffs, Hovsepian said. The company has focused on trimming its cost structure for the past three years and will continue to try to manage within that, he added.

The company has not cut down on ongoing development of products, Hovsepian said. Over the past two years, it has reduced the number of development centers from about 15 to four large centers in Bangalore; Provo, Utah; Nuremberg, Germany; and Toronto, as well as about three midsize facilities, but that is mainly to make them easier to manage, Hovsepian said. Many of the smaller centers became part of Novell after the acquisition of other companies.

The company's Bangalore development center houses about 600 of Novell's approximately 1,500 development staffers, and it may not add any more workers this year because of the economic conditions, said Naresh Shah, Novell's vice president for global engineering strategy and managing director of the India development center. The Bangalore center is Novell's largest development site outside the U.S.

Expanding its development operation in Bangalore over the past two years has helped the company get more productivity out of its development dollars, Hovsepian said. The company has also moved product management for some of its products to the Indian operation, which has end-to-end responsibility for some of Novell's products, Shah said.

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