[Fwd: Client Server NEWS FLASH: Novell Plans To Can 60% Over Time]

From: Jeff V. Merkey (jmerkey@timpanogas.com)
Date: Sat Sep 02 2000 - 21:21:20 EST

The other reason I am withdrawing NDS on Linux is to staunch the flow of
blood from Novell's jugular and prevent Microsoft from snatching it up
and using it to kill Novell. Just in case folks don't understand, the
person in this article who attempted suicide was a friend of ours. I
don't want to see any more of my friends trying to end it all because we
put out NDS too soon and NT and killed off Novell. NDS on Linux would
actually help Novell, however, once I release the source code, MS will
grab it then it will all be over for Novell.

This has us here really shaken up. Just so everyone knows. Linus, I
apologize for withdrawing it at this time, and I will reconsider NDS but
not until the situation at Novell calms down.



attached mail follows:

      Client Server NEWS 365.1 NewsFlash
The Very Independent Observer of Microsoft, Windows 2000/NT and Other
     September 2, 2000 - New York & London

Novell Plans To Can 60% Over Time
By Maureen O'Gara

Saturday, September 2, 2000 - Novell is planning to terminate 60% of
its current workforce over the next six-nine months, according to
sources close to the company.

The first cuts are reportedly supposed to start in earnest either this
Tuesday or Thursday, although sources say management could still
dither around until the second week in September. As we previously
reported over two weeks ago now, the initial cuts are supposed to
claim 27% of Novell's staff, estimated to be about 1,400 people (CSN
No 363).

Novell has yet to admit to the layoffs despite the fact that in the
last 48 hours eWeek, Network World, Bloomberg, the Wall Street
Journal, CNET and Don Young of PaineWebber have all finally cottoned
on to what's about to happen. Many Novell insiders have already been
notified of the redundancies, but the company continues to hide behind
the screen of its fiscal year 2001 budgeting exercise, which Young
believes ends Wednesday. It has told others, as it told us a fortnight
ago that the promised steps that it will take to make expense conform
to declining revenues won't be clear until then.

It was otherwise unclear to us at press time whether Novell management
is anticipating one mass "walk-out" of those who are fired or whether
it would choose a more tortured staggered approach. Novell security
and its IT department, apparently fearing some reprisals, have already
been told to batten down the hatches to protect the company's
intellectual property and servers, suggesting that a lock-out would
make more sense.

The personal impact of such a layoff, unavoidable now because of
Novell's increasingly desperate financial picture, is rarely
appreciated. One Novell employee, reportedly knowing he would be
fired, has already attempted suicide. The .38-caliber bullet he tried
to put through his heart missed its mark. He is in the hospital

Employee anger, resentment and lack of productivity are bound to
escalate when the staff that remains after the first cuts are made
realizes that it will be decimated again, observers said. Novell's
board and senior management have quietly signed off on a plan to fire
roughly another 30% of the staff by the end of the second calendar
quarter of next year, sources say.

As part of the plan, Novell is said to be contemplating shutting down
its operations in Utah, where it has historically been a prime
employer, and retreating to its campus in San Jose in Silicon Valley.
Presumably a skeleton force would remain behind.

Novell has toyed with the idea of pulling out of Utah for some time.
The initial cuts this week, which will hit worldwide and across-the-
board, are expected to strike Utah and the Novell sales force
particularly hard. How the company can pull out of its sales spiral
with a depleted sales force remains to be seen.

Observers claim that Novell's shrinking revenue outlook, ascribed to
its own mismanagement of the channel, which has traditionally
delivered 75%-80% of Novell revenues, coupled with incursions on its
aging NetWare bailiwick by NT and Linux and the badly handled internal
reorganization Novell has recently undertaken, will be aggravated by
the company's decision to buy back $500 million worth of Novell stock.
Since the company currently has about $675 million in the bank, the
prospective $500 million outlay would reduce the cushion it needs to
support a staff anywhere near its current size.

Simple arithmetic suggests it is aiming to hone itself down to around
2,200 people.

It is rumored that one of the reasons the company has decided to buy
back the stock, rather than husband its resources, is to amass enough
shares to make it impossible for the board or senior management to be
voted out or removed in case stockholders become irate. The tactic may
also have the added benefit of artificially inflating the stock price
so people can cash out.

The shares lost six cents on Friday and settled at 12.19.

Published reports have started circulating in the last day or so that
Novell has been trying to spin off the Net Content business that it
set up in May when it reorganized into four divisions in the face of
its dismal second-quarter results. Novell attached its chief architect
Drew Major, the father of NetWare, to the unit. Our own sources say
that it is Major's reluctance to leave Novell that has repeatedly
stymied the spin-off. Novell has reportedly tried several different
approaches to the spin-off.

Novell is reportedly anxious to ease Major out. He wields considerable
influence inside the company, where many of the engineers regard him
as something akin to a holy prophet. Management regards him as
uncontrollable. Novell under the current administration is embarked on
a strategy to kill off NetWare and morph into an Internet company. Its
problem is that it has no product of comparable size to replace
NetWare with and nothing on the horizon

The Net Content unit, currently headed by Simon Khalaf, the former CEO
and founder of JustOn, which Novell acquired in January, includes
Novell's Internet Caching System (ICS) and some other content
distribution, hosted services and online storage technologies that the
company has been developing. The operation is supposed to target high-
end web hosters and other fashionable service providers to get to the
dotcoms and e-business enterprises.

ICS, however, by Novell's own admission, stalled in the marketplace
because of reliability issues and had to be restarted. In the third
quarter Novell reported that caching brought in only $2 million. At
the time Novell's embattled CEO Eric Schmidt professed himself
"determined to get it right."

ICS is based on NetWare. Without it there is little reason to buy the
caching. Given engineering's bias, there is little hope of porting to
more chi-chi platforms.

Novell's wispy DigitalMe and InstantMe are part of the Net Content
unit. Although the stuff is supposed to solve the Internet's
personalization and identity crises, they hit market as mere ghosts of
what they were supposed to be, which may explain why they have had
little traction.

Network World, which says that plans to get two other companies to
invest in the spin-out have fallen through, suggests that Novell has
also been in talks with Tivoli to acquire Novell's ZenWorks management
products. When asked about rumors of spin-offs last month, Schmidt
denied it and said he was unable to comprehend how a company could be
"more highly valued with fewer pieces." He never completely ruled it
out however.

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