Novell to lay off 1,400, continue restructuring

Contradicting yesterday’s “no comment” at the prospect of layoffs, Novell Inc. announced this morning that it would indeed give walking papers to 1,400 employees.

That, Novell said in a statement, is a reduction of 19 per cent of its workforce, which after the job terminations will leave approximately 6,000 employees worldwide. The company said it would also write off unspecified assets in the fourth quarter ended Oct. 31. It anticipates restructuring costs to be around US$55 million.

On Tuesday, Novell announced that Eric Schmidt would be stepping down as chairman to be replaced by president and CEO Jack Messman, who came with the acquisition of Cambridge, Mass.-based consulting firm Cambridge Technology Partners Inc.

Company officials said the changes were being made as part of Novell’s ongoing effort to better integrate the Novell and Cambridge organizations and in reaction to the decline in the IT market and an anticipated slow economic recovery in 2002. Novell anticipates that the restructuring will be completed sometime in next year’s second quarter.

Novell spokesman Bruce Lowry said the cuts will be made across the board. “The cuts are not focused in any one area,” Lowry said. “Specific decisions will be made on a business [unit] basis. We will do what we need to do to move forward.”

Lowry said the engineering group will be just marginally affected. “There is not a shift away from our product development capabilities as some thought would happen when we acquired Cambridge Technology Partners.”

“Novell is clearly trying to transition away from a product focus and moving to a service focus,” said Rob Enderle, a research fellow at Giga Information Group Inc. in Cambridge, Mass. The changes couldn’t come at a worse time, given the economic downturn, Enderle said. Novell could potentially benefit from the recent settlement rulings in the Microsoft antitrust case regarding product compatibility, Enderle said, but that, he added, could take up to 24 months.

The changes at Novell came in advance of fourth-quarter earnings announcements scheduled for Nov. 29. Messman said in a statement that Novell’s fourth-quarter results would be in line with expectations.

Novell reported this morning that it expects fourth-quarter revenues to be US$306 million, compared with US$247 million in the third quarter, with earnings of a penny per diluted share.