Novell slashes workforce

Novell has today announced it is cutting its workforce by 16 per cent as part of a plan to improve the performance of its business by concentrating on the services market.

The loss of 900 positions worldwide, which a spokeswoman described as "across the board", will leave Novell with a global workforce of approximately 4600.

The announcement has been made on the same day as arch-rival Microsoft celebrates its 25th birthday.

As well as the job cuts, Novell is also writing off certain other assets, which it estimates will result in pre-tax restructuring charges of between $40 and $50m in the fourth fiscal quarter of this year, which ends on 31 October.

In its last quarter, Novell announced it was creating four business groups to address various internet services opportunities. These are net content, net management, net directory, and Novell customer services groups.

"We're reducing expenses overall and freeing up dollars to spend on key sales, marketing and development initiatives," said Novell chief executive Eric Schmidt. "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.

"Immediate benefits will come from the prospect of better earnings performance after lowered expenses. The greater objective is returning Novell to growth, increasing our investments in new net services, while maintaining high levels of customer support."

Novell claimed that despite the cutbacks it will continue to spend a higher percentage of its revenue on product development, sales and marketing than other software vendors.

The company has been trying to expand its business with applications such as GroupWise, Zen Works and Novell Directory Services (NDS). However, its main form of revenue, the Netware operating environment, is slowing down, according to some analysts.

Dan Kusnetzky, program director at analyst IDC, said the perception of Novell's job cuts is that the vendor is going into a "death spiral", but that this is not the case.

"In reality, Novell makes very good technology but it has not been marketed as well as it could have been," he said. "Novell had a window to make NDS pervasive while the industry waited for Active Directory - but it has failed to exploit it."

"They should have given it [NDS] away to make it pervasive, but now it's too late. Novell's share of the server operating environment has been in steady decline," he added.

Novell has suffered because business managers considering server consolidation have picked either Unix or Windows NT as platforms, said Kusnetzky, who added that a lack of applications for Netware was also a problem.

To turn things around Novell will have to stress the business benefits of its products, not technological excellence, said Kusnetzky. The company also needs to improve partnerships and alliances with other vendors, he added.