Novell Announces Restructuring to More Closely Align Expenses with Core Business Strategy
Annual run rate expense savings expected to exceed $110 million; Citigroup hired to explore strategic alternatives for consulting subsidiary Celerant
Novell, Inc. (NASDAQ: NOVL) today announced it will concentrate its business on key growth opportunities in the Linux and Open Source and Identity and Resource Management markets, resulting in a restructuring of the business that will reduce annual run rate expenses by more than $110 million. Novell anticipates that it will record a restructuring charge in the range of $30-35 million in the fourth fiscal quarter 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. When completed in the first fiscal quarter 2006, the cost restructuring is expected to result in a total headcount reduction of approximately 600 positions, more than 10% of Novell’s worldwide workforce.
Jack Messman, Novell’s chairman and chief executive officer, said, "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. While it is a difficult decision to eliminate positions in our talented and dedicated workforce, this move is necessary to ensure that our costs are more closely aligned with our business strategy. 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."
As a result of the restructuring, product development and consulting resources are now more focused on the company's growth businesses, Linux and Identity. Novell also expects to continue to evaluate non-core consulting activities. The company maintains its commitment to its sales resources, while it continues to align sales skills with its 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. "By doing so, we will be able to reduce product development expenses, consolidate our worldwide operations, better focus our marketing efforts and realize operational efficiencies in the general and administrative function. While the cost reductions will result in some lost revenue opportunities, the net result is expected to be improved profitability as we enter fiscal year 2006."
Highlighting the company’s increased focus on its core businesses, Novell also announced today that its Board of Directors has authorized management and its financial advisor, Citigroup Corporate and Investment Banking, to explore strategic alternatives for Celerant, Novell's consulting subsidiary. The company has previously stated that it intends to separate Celerant from Novell when market and other conditions are appropriate.
Novell expects to provide additional information and an update on guidance when it reports its fourth quarter earnings.
Novell, Inc. (Nasdaq: NOVL) delivers Software for the Open Enterprise™. With more than 50,000 customers in 43 countries, Novell helps customers manage, simplify, secure and integrate their technology environments by leveraging best-of-breed, open standards-based software. With over 20 years of experience, Novell's 6,000 employees, 5,000 partners and support centers around the world help customers gain control over their IT operating environment while reducing cost. More information about Novell can be found at http://www.novell.com.
No decision has been made regarding any particular alternative related to Celerant. There is no assurance that the exploration of strategic alternatives will result in any definitive agreement or transaction. The Company undertakes no obligation to make any further announcement regarding its consideration of strategic alternatives for Celerant.
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements," including those related to the extent and timing of reductions in annual expenses and headcount, the effect of the restructuring on profitability and the Company’s evaluation of non-core businesses. You should be aware that Novell's actual results and activities could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, unanticipated business and regulatory developments and the other factors described in Novell's Annual Report on Form 10-K for the fiscal year ended October 31, 2004. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release.
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