For big companies that want to use the Linux operating system and get business-level support, there are only two main options: Red Hat Inc. and Novell. And one of those looked shaky last week.
After two years of refocusing, reinvention, and restructuring, Novell is reducing its staff by 10% to save money and suggesting that a change in CEO may be on the horizon. It's all part of trying to deliver on the growth promised when the company staked its future on open-source software in 2003. Novell's profits were up substantially between fiscal 2003 and 2004. But profits have slipped in recent quarters as the company struggles to make gains with its open-source and identity-management technology strategies, while also trying to make its aging NetWare networking platform relevant again.
Novell's cost cutting, which includes dismissing about 600 employees and cutting research-and-development spending, is expected to save the company more than $110 million annually. Roughly half of the layoffs are taking place in North America, while the rest will be spread across the company's worldwide offices.
The cuts are part of Novell's "transformation," Messman says.
Novell says it's focusing resources on Linux and identity management, but it won't comment on which areas of the business will take the biggest hit. The company's SuSE Linux and desktop computing groups, bolstered by staff from Novell's 2003 acquisition of Ximian Inc., are "very much alive and well," a spokesman says. Novell chairman and CEO Jack Messman, who's been under fire from analysts and shareholders, characterized the cuts in a statement as the end of a "comprehensive transformation" of the company.
The company last week also tagged Ronald Hovsepian as Messman's likely heir. He was promoted from executive VP to president and chief operating officer, and provisions were added to his contract that give him cash and stock options if he doesn't succeed Messman. Hovsepian was just promoted in May to president of worldwide field operations. That same month, Novell parted ways with former SuSE Linux president Richard Seibt, who'd been president of the company's Europe, Middle East, and Africa region. But the company still employs key open-source figures, including Miguel de Icaza, leader of the open-source Mono project launched in 2001 to let Unix developers build and deploy Microsoft .Net-based applications on different platforms, including Linux. Novell's VP of engineering for desktop and collaboration is Nat Friedman, a co-founder of Ximian.