Novell Cuts Staff, Prepares to Sell Consulting Arm

The ax comes down, but fewer employees than expected will feel its cut. However, the Linux company is preparing to sell its consulting subsidiary, Celerant.

It came as no surprise on Wednesday when Novell cut approximately 600 positions, more than 10 percent of its worldwide workforce, but that was far less than the 20 percent many Novell insiders had been predicting.

This move is expected to reduce Novell Inc.s run rate expenses by more than $110 million. The company anticipates that this move will result in a restructuring charge in the range of $30-35 million in the fourth fiscal quarter, which ended Oct. 31, 2005.

The full effect of the cost reductions is expected to be realized in the first fiscal quarter ending Jan. 31, 2006.

At the same time, Novell announced that it will concentrate its business on key growth opportunities in the Linux and open-source and identity and resource management markets.

/zimages/4/28571.gifNovells new president welcomes the challenges of open source. Click here to read more.

Jack Messman, Novells chairman and CEO, said in a statement, "This cost restructuring initiative is part of the comprehensive transformation of Novells business that the management team has been designing and implementing over the past year. While it is a difficult decision to eliminate positions in our talented and dedicated work force, this move is necessary to ensure that our costs are more closely aligned with our business strategy."

"The key driver in this cost reduction is to focus more of our resources on our growth areas," said Joseph S. Tibbetts Jr., senior vice president and chief financial officer.

Novell also announced that management and the companys financial advisor, Citigroup Corporate and Investment Banking, are exploring options to sell Novells consulting subsidiary, Celerant.

Celerant, the former Cambridge Technology Partners, was headed by Messman until its acquisition by Novell in 2001. As part of the transaction, Messman took over as Novell CEO from then-CEO Eric Schmidt.

However, Novell also said that no particular decision has been made regarding Celerant. Thus, Celerant may still end up remaining part of Novell.

These moves come after major stockholders, Blum Capital Partners LP in particular, called for Novell to cut costs and to start divesting itself of non-core businesses such as Celerant.

In addition, the company replaced Messman in its day-to-day operations with the promotion of Ron Hovsepian, formerly executive vice president and president of global field operations, to president and chief operating officer of Novell on Monday.

While Novells recent Linux offerings, such as SuSE 10, have received widespread praise, the company has struggled in the marketplace.

Novell will provide additional details when it reports its fourth quarter earnings in a few weeks.

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