Novell Cuts Workforce

The company will eliminate 10% of jobs as part of a restructuring.
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Troubled

Novell

(NOVL)

did the expected Wednesday, announcing a major restructuring that includes a 10% reduction in workforce.

The restructuring will reduce annual run rate expenses by more than $110 million and will result in a restructuring charge of $30 million to $35 million in the just-completed fourth quarter.

When completed in the first fiscal quarter of 2006, the cost restructuring is expected to result in a total head-count reduction of about 600 positions, the company said in an announcement after the market closed on Wednesday.

The move had been

rumored for some time, as Novell's management came under increasing pressure from institutional shareholders to goose the company's lagging performance.

"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. He said Novell will now focus on Linux and identity management and will "continue to evaluate non-core businesses." Shareholders, with Blum Capital taking the lead, have asked management to divest the company of a number of core businesses.

"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," Tibbets said.

Novell was long-known as the supplier of a popular network operating system called NetWare, whose relevance and popularity have faded. Last year, it purchased SuSe, a small software company that developed a flavor of Linux, the popular free operating system.

The company also announced Wednesday that Ronald Hovsepian has been promoted to president and chief operating officer.

Novell shares gained 8 cents in after-hours trading to $7.55 a share, after ending flat in the regular trading session.