Novell posts Q2 loss, plans layoffs

Struggling software company Novell last week reported that it will lay off 5 per cent of its employees after posting a second-quarter loss that it blamed on write-downs, slower IT spending and the company's transition from selling proprietary networking software to products that link the technology of different vendors.

The one-time leading provider of networking software posted a loss of $US151.3 million, or 48 cents per share, in the quarter ended April 30. The company reported that its loss was mainly the result of a $142 million write-down of equity investments. Excluding the write-down, the company posted a loss of 3 cents per share.

The write-downs included a $100 million investment in MarchFirst, as well as $42 million for other equity investments in both public and nonpublic Internet companies, Novell said.

Novell chairman and CEO Eric Schmidt said the company expects to return to profitability by the end of fiscal 2001, "through job reductions and additional savings in the areas of travel, advertising and recruiting costs".

The layoffs affect about 260 of Novell's 5200 employees and are set to take place by the end of the month, the company said.

"Today's announcement reflects fallout from the Internet sector, as well as the continued decline in enterprise IT spending. Also, transition issues in our move to solution-selling inhibited the company's performance," Schmidt said in a statement.

Novell has continued to hold out hope for legacy products such as NetWare, which is being outpaced by Windows 2000. And with new products such as One Net making little to no headway in the marketplace, the result has been a steady 15 per cent to 20 per cent year-over-year decline in revenue, one industry expert said.

Novell has bet heavily on One Net, which purports to tie heterogeneous intranets and extranets together through directory and security technology.

Schmidt said in the statement that One Net "will provide the strategic foundation for IT solutions over the next several years."