Novell cuts jobs after poor results

As part of its third-quarter earnings report on Thursday, Novell announced that it has cut 10 per cent of its work force in an effort to turn a profit in the fourth quarter.

The networking-software maker, which recently turned its attention to Linux, managed to slightly improve its year-on-year revenue growth. But net profits fell into the red.

Novell generated revenue of $283m during the quarter that ended 31 July, compared with $282m for the same period last year. Analysts expected the company to generate revenue of $278m, according to First Call.

Meanwhile, the company posted a net loss of $12m, or 3 cents a share, compared with a profit of $10m, or 3 cents a share, a year ago. Novell's quarterly performance matched analysts' estimates, according to First Call.

Novell CEO Jack Messman said in a statement: "We are encouraged by our third-quarter results. 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 cut most of the 600 positions during the third quarter, bringing its global workforce to 5,700 at the end of the quarter. The company is hoping to save roughly $100m in operating expenses.

The quarter was also marked by Novell's Linux strategy and related acquisitions. Last June, Novell announced its Nterprise Linux Services software package, which is due to ship by the end of this year.

And in August, Novell acquired Ximian - a move designed to help its customers adopt Linux on the desktop. Although there was speculation Novell would nix its NetWare operating system in favor of Linux, Messman says that won't happen.

"Novell is not diminishing support for its NetWare product line," Messman said. "We are adding Linux. Novell plans to deliver a full range of solutions to help customers maximize the value of investments in Linux and open source."

And this Linux effort is expected to bolster Novell's NetWare business, said Drake Johnstone, an analyst with Davenport & Co.

"What I assume is [that] Linux will stabilise and eventually help grow the NetWare business," Johnstone said. He added that Novell's total revenue is expected to increase 14 per cent to 15 per cent next year and that the company may earn 20 cents to 25 cents per share during fiscal 2004.

Shares of Novell rose in after-hours trading to $3.96 on the Island ECN electronic marketplace. During the regular session, Novell closed up 4 cents a share, or 1.07 per cent, to $3.77 on Nasdaq.

Dawn Kawamoto writes for CNET News.com