Novell's first major step towards becoming a services-led company following its $266m proposed acquisition of Cambridge Technology Partners (CTP) has led to the sidelining of chief executive, Eric Schmidt.
Schmidt, who has been in discussions with the e-services supplier since the first week in February, will be replaced by CTP's president and chief executive, Jack Messman. But Schmidt will remain as chairman and become chief strategist, with a strong focus on technology issues.
He will also continue to serve as chairman of Volera, a joint venture with Nortel and Accenture (formerly Andersen Consulting), which aims to push Novell's internet caching technology and content management services.
Clive Longbottom, an analyst at Quocirca, said: "Schmidt has done as much as he can. He was brought in to turn Novell around, which he hasn't done, but he's stopped it spiralling downwards. If he had stayed, Novell was likely to spiral again and it needs new blood, so it was time for him to move on. But he's not the sort to stay in this situation - he likes a challenge."
"In some ways, this acquisition is a smart move because Novell has never had a services capability and products like directory services need skills in place. But it's a little on the late side to resurrect Novell's chances. Long term, it will become a services-led company that is relatively agnostic like IBM Global Services," he added.
The purchase of CTP is due to close in June and the company will operate as a wholly-owned subsidiary of Novell and increase the level of revenues that the networking vendor generates from consulting services from five per cent to 30 per cent by 2002.
Schmidt explained: "The 50 per cent annual growth that we were achieving from our consultancy business was not enough to take us where we wanted to be, but the CTP acquisition achieves that goal. We want to be the leader in the internet services market and Novell needed this step to do it."
Novell currently has 350 consultants compared with CTP's 2500, but the combined organisation will employ a total of 8600 staff. It is expected to generate revenues of $1.2bn in fiscal year 2001, on earnings per share (EPS) of 18 cents.
Sales are expected to increase to between $1.6bn and $1.7bn during fiscal 2002, on EPS of 50 cents. But Novell also anticipates cutting costs by $46m in the second half of the year as a result of making an unspecified number of redundancies, closing offices and integrating networks and applications to save on IT expenditure.
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