Novell Announces Employee Reductions and Cost Savings Intended to Improve Business Performance
Anticipates Greater Than $40 Million Pre-Tax Fourth Quarter Charge
Novell, Inc. (NASDAQ:NOVL) today reported that it is reducing its workforce by 16 percent, or approximately 900 positions. After the reduction, the number of employees worldwide will total approximately 4,600. The company is also writing off certain other assets, and anticipates taking a pre-tax restructuring charge of between $40 and $50 million in its fourth fiscal quarter, ending October 31, 2000.
Novell expects to reduce its overall quarterly cost of doing business by approximately $25 million, beginning in the first fiscal quarter of 2001. The restructuring is part of management plans to focus the organization on the Net services market and improve the company's business performance. In Novell's third fiscal quarter, four business groups were formed to address various Net services opportunities. On August 16, the company stated it would complete steps early in its fourth fiscal quarter to lower expenses and align variable costs with its current $1 billion plus annual revenue run rate.
Total quarterly savings from the restructuring is approximately $45 million, but increased spending on Net services related initiatives will offset approximately $20 million of the initial quarterly savings.
"We're reducing expenses overall, and we are also freeing up dollars to spend on key sales, marketing and development initiatives that are part of our strategic focus," said Novell Chairman and Chief Executive Officer Dr. Eric Schmidt. "These actions are intended to improve the business in 2001, as we build the value of the Novell brand and accelerate deployment of Novell Net services that support how business is done on the Net. "Immediate benefit will come with the prospect of better earnings performance after lowering expenses. The greater objective is returning Novell to growth, increasing our investments in new Net services, while maintaining high levels of customer support."
After the alignment of its expenses, Novell will continue to spend a higher percentage of total revenue on product development, and sales and marketing, than do many established software companies. General and administrative expenses are planned to match industry norms.
This press release contains forward-looking statements about future reductions in force, other cost cutting actions, organization changes, product flows, changing markets, sales and marketing efforts, near and long-term objectives, potential new business, strategies, Net services focus, financial operating targets and expectations, and plans to improve the company's business performance and return Novell to growth. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include the following: business conditions and the general economy; changes in distribution choices and channel partners; competitive factors; sales and marketing execution; shifts in technologies or market demand. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's fiscal 1999 report on Form 10-K, as well as in its annual report and Form 10-Q filings.
Novell, Inc. (NASDAQ:NOVL), is the leading provider of Net services software that delivers services to secure and power all types of networks the Internet, intranets, and extranets; wired to wireless; corporate and public across leading operating systems. Novell's Net services software provides the foundation for one Net a single global network that supports new applications and forms of business. Worldwide channel, consulting, education and technical support programs, along with strategic alliances, combine Novell Net services software with third-party products and services to form complete Net solutions.
For information on Novell's complete range of products and services, contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit Novell's Web site at http://www.novell.com. Press may access Novell announcements and company information on the World Wide Web at http://www.novell.com/pressroom. In addition, detailed comparisons between Novell products and competitive offerings from other vendors are available on the Web at http://www.novell.com/competitive.
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