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Novell decimates workers, goes into the red

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Novell yesterday confirmed the loss of 600 jobs - amountin to ten per cent of its workforce - as it announced a damaging quarterly loss on flat sales.

For its third fiscal quarter ending 31 July, Novell reported revenue of $283 million, compared to $282 million for Q3 2002 and $276 million for Q2 2003. Net loss for the quarter was $12 million compared to net income of $10 million for Q3 2002.

For the first nine months of fiscal 2003, Novell reported revenue of $819 million and a net loss of $53 million.

Novell's earnings-before-bad-stuff for Q3 2003 came out at $7 million. This figure excludes a $26 million restructuring charge, a $24 million charge for impaired intangible assets, $8 million in charges for impaired investments, a gain on the sale of real estate of approximately $25 million, and the related tax effects of these items.

During the quarter, Novell strove to reduce its annual operating expense by approximately $100 million, primarily through a workforce reduction of ten per cent, or approximately 600 positions.

Most of these redundancies were made by the end of July, lowering Novell's global headcount to 5700. Novell expects this workforce reduction to account for approximately $75 million of the anticipated savings in operating expense, with the full benefit from the reduction being gained from Q1 2004 onwards. An additional $25 million in annualised savings is expected from lower levels of non-salary related operating expense.

Jack Messman, Novell's chairman, president and CEO, put a brave face on Novell's results and optimistically pointed to brighter prospects ahead.

"We are encouraged by our third quarter results," he said. "We took significant steps to improve Novell's business performance through cost-cutting measures intended to enhance our profitability beginning in our current fourth quarter. Novell also continued to gain major new contracts based on the importance customers place on secure identity management and application integration solutions.

"The combination of these new solutions, our continued investment in NetWare development, expanding support for open standards and Linux, and the growing importance of secure Web services, strengthens Novell overall," he said.

Messman added that the company sees "significant growth opportunities" because of its recently announced commitment to Linux, which he stressed would not be at the expense of the development of Novell's Netware product line.

Security, Linux key to Novell roadmap

In June, the company announced Novell Nterprise Linux Services with file, print, messaging, directory and management services as an integrated package that runs on Linux. Beta testing began in late July. It is due to ship from Novell and its partners by calendar year-end.

Novell added to its Linux initiative on 4 August, days after the close of its third quarter, by acquiring Ximian.

Novell's sales of identity management and secure Web services software (Nsure and exteNd) grew strongly during its third quarter, up 34 per cent year-over-year to reach $26 million in Q3 2003. Novell brings these solutions to market under the brands. Cross-platform services software, marketed under the Nterprise brand, declined six per cent year-over-year to $144 million. Total software licence and maintenance revenue was down one percent year-over-year to $170 million.

Revenue from worldwide services (Ngage), including IT consulting and other customer services, declined three percent year-over-year to $76 million. Celerant management consulting revenue was up 16 per cent year-over-year to $37 million.

By geography, revenue in the third fiscal quarter from the United States was $129 million, down ten per cent from the same period in the prior year. Bu contrast, the EMEA region contributed $113 million in revenue, up 11 per cent year-over-year. Revenue from Asia Pacific, including Japan, was $23 million, up 15 per cent year-over-year. ®

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