Client Server NEWS FLASH: Novell Plans To Can 60% Over Time Client Server NEWS 365.1 NewsFlash The Very Independent Observer of Microsoft, Windows 2000/NT and Other Phenomena 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 recuperating. 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. - - - - - - - - - - - - Catch up on all the e-commerce news: www.onlinereporter.com Linux business news is at www.linuxgram.com Client Server News 2000, The Online Reporter and LinuxGram are published weekly by G2 Computer Intelligence Inc. http://www.g2news.com ; 323 Glen Cove Avenue; Sea Cliff, NY 11579 USA; Tel.:516 759-7025 Fax: 516 759-7028. Send press releases to news@g2news.com Available at quantity discount to associations, groups, departments and companies. paperboy@g2news.com Europe: Simon Thompson simon@g2news.com Tel: (44) +01280 848 030; Fax: (44) +01280 848 017 (c) Copyright 2000, G2 Computer Intelligence, Inc. Comments? Subscription, permission to post to a web site or reprint info?: e-mail: paperboy@g2news.com