In the wake of disappointing second quarter figures, Novell detailed plans to dramatically reduce inventory this quarter by stopping shipments to distributors. It will also axe 18 per cent of its staff around the world. This reduces the headcount by 1,000 to 4,800.
Over the next three months Novell is attempting to reduce its product inventory as it moves to selling a greater percentage of software through multiuser licences rather than ?red boxes?, according to Tom Schuster, vice president of Novell?s northern region.
Chief executive Eric Schmidt said: ?Current levels of product inventories are no longer appropriate as Novell?s business continues to experience competitive pressures, and to shift from high reliance on boxed software distribution, to a changing mix of boxed products and multi-product licenses.?
This inventory reduction will be achieved by stopping shipments of additional products to distributors in the third quarter. Novell expects this will result in an operating loss during the quarter, while the job cuts will create a one-time restructuring charge of around $35 million. Schmidt said the cuts are part of Novell?s bid to become ?a pure Internet leader in the expanding multi-billion dollar network service software market".
Last month, Eric Schmidt, the company?s newly installed chief executive, warned that Novell would turn in revenues of between $300 million and $335 million. But the actual figures were even worse, with of $273 million and a net loss of four cents a share. However, although worse than Wall Street had expected, the numbers are up on the same quarter last year, which saw revenues of $188 million and a loss of 15 cents a share.
The 1,000 redundancies include the 50 job cuts already being made around Europe. Officials would not comment on which jobs will go but said the move is part of a major company restructure. This is necessary to respond to changing markets, the new focus on the Internet, and a shift to selling products through licences, explained Schuster.
?When companies restructure certain departments get amalagamated, or fall away. There are no [departments] specifically targeted but we will reduce our cost base to reflect our revenue numbers,? said Schuster.
Analysts believe Novell?s restructuring aims will be hard to achieve given the marketing muddle the company is currently in. Laurent Lachal, analyst at Ovum, said: ?Novell doesn?t know how to present itself. Is it a network operating systems company, a Lan management company, or a groupware company? It has a bunch of products, some of which are good, some of which are less good. But no one has come out with a good strategy.?
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