October 21, 2005 7:33 PM PDT

Major layoffs expected at Novell

Novell is expected to initiate a major round of layoffs that could cut 1,000 or more jobs in an attempt to restore the server software company's financial strength, according to employees familiar with the plan.

The layoffs, which were first reported by BusinessWeek, are expected to hit about 20 percent of the company's 5,800 employees and likely will be announced near the end of Novell's fiscal year, which ends Oct. 31, sources said.

Novell is under increasing financial pressure, particularly after the company reported third-quarter results in August in which revenue dropped 5 percent to $290 million and net income dropped 91 percent to $2.1 million.

The loudest call for reform came from Blum Capital Partners, which owns more than 5 percent of the company's stock. Blum has urged major changes for months, including new top management, a greater emphasis on Linux and sales of several divisions. Credit Suisse First Boston analyst Jason Maynard also called for major changes in September, including new management.

Novell declined to comment for this story, though it has indicated it agrees with its critics' assessments in some ways. In September, the Waltham, Mass.-based company announced plans to buy back its stock, a move Blum and Maynard both advised.

And in an Oct. 4 response to Blum disclosed in a regulatory filing, Chief Executive Jack Messman indicated cuts were coming: "Our cost structure will be better aligned to our strategy as part of our 2006 fiscal year planning."

That statement came not long after the company's disappointing third-quarter financial results, during which Messman also said cost-cutting is on the way: "I think we still need to make some operational enhancements to our business and to our corporate functions and in the field, which will lead to further cost reductions and efficiencies."

Celerant, a Novell consulting subsidiary, is a definite candidate for divestiture.

"As we have often publicly stated, we view Celerant as a noncore business. We envision Celerant being separated from Novell in some fashion when market and other conditions are appropriate," Messman wrote to Blum in a June letter disclosed in a regulatory filing.

Other cuts are likely too.

One source said the cuts almost certainly will hit Novell's Extend product line, software based on the application server Novell obtained when it acquired SilverStream Software in 2002. And Novell likely will pull back from regions where it hasn't been successful, leaving sales to business partners that resell the company's products.

Since Microsoft undermined Novell's core business selling the NetWare server operating system, the company has sought to transform itself for years. It embraced open-source software, chiefly the Linux operating system, through its $210 million acquisition of Suse Linux in 2004.

Blum called for Novell to sell its GroupWise division, which sells e-mail and calendar software, and its ZenWorks division, which sells management software. But in the Oct. 4 response, Messman indicated neither move is likely.

"While GroupWise today is under significant competitive pressures, a move to an open-source offering will help us revitalize this category," he said, referring to the Hula project Novell launched in February. And of ZenWorks, he said, "The ability to manage cross-platform systems will continue to be a key differentiator for Novell. ZenWorks is the foundation upon which we will expand our world-class IT system management capabilities."

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Novell User.
I think that Novell is doing what it seams they have always done. Buy up something and then nobody know what to do with it.

I think Novell is a great company that sells great products, but I think they are burning the candle at both ends at the moment. I would like to see them make groupwise easier to install, setup, and manage. I would also like to see them port the Evolution e-mail client over to Windows.

One thing I hope they are working on is a better patch management system for Netware products and Linux products. Thier are a lot of improvements that need to be done at Novell. I just hope they are able to make those improvements without sacrificing the quality I have come to expect from Novell.
Posted by System Tyrant (1453 comments )
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The usual CEO Ha ha pink slip!
Blame the workers for stupid cheap harvard style business mismanagement decisions which fail to work nine times out of ten due to failing to program for any future past 12 months. Better, than fair odds, both the Novell Board Chairman and the CEO, will be paying themselves super large bonuses, for making these hard decisions signing the pink slips, and in less than 18 months, employment levels will undoubtedly increase(the Hamburg Linux Conversion Contract will require major staffing increases to allow for it's successful conclusion to end dependence on closed buggy/poor security MS$ non comforming document standardisation computer software) The Standard Prime Pradagim in use by all merchant banking guru's is maximum profits and returns and zero fund expenditure for long term planning on any project which does not yield a minimum 100% return past 12 months, thus all employees are to be considered as unfunded expendables! But then again who generates these corporate profits, for it ain't the CEO or these merchant banking guru's is it! Many past examples exist on how they failed in due diligence to warn the public of impending corporate implosions, and self destruction, from internal CEO theft and deception, like ENRON, or the more recent CHAPTER 11 filing at DELTA AIRLINES. Curiously, these banking guru's are very quiet these days, about the key fundamentals required to maintain, operate and generate all company income! Did they say anything, when a major accounting firm KPMG(ERNST YOUNG were just as duplicitous as well at that time),was knowingly, from 1996 until 2002, willingly and wilfully filing false corporate and personal tax returns to deliberately and mechanically avoid legitimate tax payments due! So what do they really know??????????? Trust me we know what we are saying, and will always never admit to infallibility, zero management or people skills or for failing to appraise the real situation in corporations like ENRON, PARMALAT(a european dairy products company in a version supprisingly similar to ENRON in a number of aspects) or Delta Airlines!!!!! Ha Ha, believe us and you will also believe any propaganda, released by the media cartels, that purports to be news these days!
Posted by heystoopid (691 comments )
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Get rid ot the Management Team from CTP
Instead of laying people off, which is the solution for all CEOs maybe they should take a look at the processes, they are not efficient. The easy way out for these individuals is always laying people off, if the company has to lays off personnel to better their financial situation, how about cutting the exorbitant bonuses that jack and friends receive. If there is no profits, no bonus period!!! They don't care if they only recieve a 1 million bonus instead of 5, why not make them feel the pain.... Bring back Eric and Chris, they cared about the company!!!
Posted by (2 comments )
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Eric & Chris.... are you kidding?!
Eric & Chris had their own agendas which had nothing to do with quality and the customer. They both wanted to provide to the public what they wanted. At least Jack and team are pushing to deliver to the customer what they want. The biggest problem Novell has had over its history is that they thought if they built the best technology the world would beat a path to their door. The reality is that if you build the best of what the customer wants... the world will beat a path to your door. That is what Jack & team are doing. By the way, you might want to find out what messes both Eric & Chris left for others to clean up before pronouncing them as the saviors of Novell. Jack might not be a charismatic man, but he damn well knows business and how to make a company successful. Now that he has a top team GLOBAL team, you will finally see Novell execute on the their plan.
Posted by ann_outsider (2 comments )
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