Update: Novell details layoffs, restructuring plans

IDG News Service - Novell Inc. said today that it plans to lay off 600 employees, or 10% of its global workforce, part of an effort to save more than $110 million annually as the struggling software maker restructures to focus on products such as SUSE Linux.
The announcement came a day after the enterprise software maker promoted Ron Hovsepian to be its president and chief operating officer. Hovsepian had been serving as executive vice president and head of global field operations,
In addition to Linux, Novell said it will concentrate on open-source and identity and resource management products. The Waltham, Mass.-based company expects to record a restructuring charge of between $30 million and $35 million in its fourth fiscal quarter, which ended Monday.
The full effect of the cost reductions is expected to be realized in its first fiscal quarter, which ends Jan. 31. Novell said it will continue to evaluate "noncore consulting activities."
"While it is a difficult decision to eliminate positions in our talented and dedicated workforce, this move is necessary to ensure that our costs are more closely aligned with our business strategy," Jack Messman, Novell's chairman and CEO, said in a statement. "This is a decisive, yet disciplined, cost-reduction action that balances the need to be fiscally prudent with the need to continually seek growth opportunities and generate long-term profitability in a highly competitive marketplace."
Novell also said its board had authorized its financial adviser, Citigroup Corporate and Investment Banking, to explore strategic alternatives for Celerant, the company's consulting subsidiary. The company had previously said that it intends to separate Celerant from Novell when market and other conditions are appropriate.

In an interview today at the Open Source Business Conference (OSBC) in Newton, Mass., the new man in the No. 2 spot at Novell talked about getting the troubled company's business back into alignment. Hovsepian had said part of the company's restructuring would include layoffs.

Novell has just closed its fiscal year, and the company has yet to say when it will release its fourth-quarter results. That quarterly announcement is imminent, Hovsepian said.

In its most recent financial report, on Aug. 25, Novell reported poor third-quarter results, with net income plummeting 91% to $2.1 million while revenue fell 4.7% to $290.2 million.

Hovsepian earlier today called the company's Celerant business "noncore" but declined to comment further. Novell is not planning to sell either its GroupWise collaboration software or its ZenWorks resource management software, he said.

"We will continue to focus on growth areas in our business -- Linux, identity and our core platforms," Hovsepian said, adding that the companyis trying to allocate company resources in a way that matches the needs of the marketplace. Novell hopes to continue to grow its relationships with independent software vendors as well as put more effort into its distribution partnerships, he said.

Hovsepian joined Novell in June 2003 as president of North American operations. Before that, he had worked at IBM for 17 years, most recently as worldwide general manager of that company's distribution industries.

Computerworld's Eric Lai contributed to this report.