Novell is axing 15% of its European staff, with further layoffs expected in other regions this week.
US officials said the cuts in Europe were "part of a restructuring of overseas units" but declined to comment on rumours of more widespread layoffs.
Novell is expected to confirm cuts outside Europe tomorrow as it posts its second quarter results. Last month, the company warned investors that revenue for the quarter ending 30 April is likely to be between $300 million (#187.5 million) and $335 million, compared with $375 million the quarter before.
The 15% cuts in Europe will affect around 50 employees. Sources close to the company said the additional cuts this week could take the total job loss figure up to 25% of the company's 5,800 worldwide staff.
According to the sources, the reorganisation, which began when Eric Schmidt took over as CEO in March, is aimed at restoring Novell to its former glory and giving it a leg up in its race with Microsoft to dominate the corporate network management and messaging markets.
As well as the layoffs, Novell is expected to slash research and development funding for all projects falling outside the core areas of IntranetWare, Novell Directory Serves, GroupWise and ManageWise.
Despite the company's continuing prominence in the networking arena and its large installed base (particularly for NDS, for which it claims it has 20 million users) its earnings have not been as impressive over the past few quarters as officials had hoped.
The layoffs came as no surprise to analysts. Jamie Lewis, president of US-based networking research company, The Burton Group, commented: "I think layoffs had to be expected. They are increasing the focus on a few very specific product areas - which is good - but they should have done it earlier."
Lewis said that Novell should have tightened its focus several years ago to remain competitive with the likes of Microsoft.
Novell declined to comment.
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