Novell To Lay Off 600 Amid Corporate Restructuring

Under pressure from stockholders for months to move decisively, Novell finally did just that by announcing a restructuring that will save $110 million, but will also result in laying off 600 employees and the likely spin off off its Celerant consulting subsidiary.

The changes were expected.

The firm said it will concentrate its business on its Linux and open source activities as well as on its identity and resource management operations. The company said also that the restructuring plan will result in a charge between $30-35 million in its fourth fiscal quarter that ended Monday.

"This cost restructuring initiative is part of the comprehensive transformation of Novell's business that the management team has been designing and implementing over the past year," said Novell's chairman and chief executive Jack Messman in a statement. "This is a decisive, yet disciplined, cost reduction action that balances the need to be fiscally prudent with the need to continually seek growth opportunities and generate long-term profitability in a highly competitive marketplace."

Some major investors had called for Messman's resignation, and while they didn't get that, they did get a new realignment of top management that has Ronald Hovespian being elevated from executive vice president to the dual posts of president and chief operating officer. Hovsepian was promoted earlier in the week.In announcing the restructuring after the close of stock markets Tuesday, Novell said it will hire Citicorp Corporate and Investment Bank, its financial advisor, "to explore strategic alternatives for Celerant." Novell noted that it had earlier said it planned to "separate" Celerant from Novell.

The firm did not specify which of its units would be hit hardest by layoffs, but speculation and rumors, which have surrounded the firm for months, have centered on its headquarters facilities in suburban Boston and its SuSE operation in Germany as potential layoff targets. The firm said more than 10 percent of its workforce of 5,100, or about 600 employees, will lose their jobs.

Novell has had a long and sometimes tortured history. Initially it battled Microsoft head-to-head sending its Netware, WordPerfect, and UnixWare products into battle with the software colossus. When that battle was lost, Novell placed its bets on its open-source software effort. The company indicated that in addition to open source, its identity unit will receive special attention as the restructuring is implemented.

While Novell has been struggling to integrate SuSE Linux into its mainstream effort and to sell it to its customers, the firm has said it is turning the corner on the product and is on the way to making it successful.