Novell to restructure, record charge

SAN FRANCISCO (Reuters) - Software developer Novell, Inc on Wednesday said it will restructure its business and record a restructuring charge in the range of US$30 million to US$35 million in the fourth quarter.

Novell said the restructuring will reduce annual expenses by more than US$110 million.

Novell, which is trying to replace its shrinking networking software business by building update and support services for Linux software, has seen its revenue shrink as costs remain high as revenue shrinks year-on-year.

"This (restructuring) is part of that transformation," said Bill Hewitt, Novell's chief marketing officer.

The cost restructuring is expected to result in a total head-count reduction of approximately 600 positions, more than 10 percent of Novell's worldwide work force, the company said, with the full effect of the reductions expected to be realised in the first quarter.

Hewitt declined to say whether those cuts would mainly impact employees in the networking business but said that there's a clear focus on enterprise software based on open standards and open source.

Novell, along with Red Hat, offer versions of Linux aimed at businesses. Linux, which runs on the same personal computers that run Microsoft's Windows software can be obtained for free and modified.

Novell and Red Hat offer subscription-style services that keeps Linux systems updated and current.

The company said it will concentrate on opportunities in the Linux and Open Source and Identity and Resource Management markets.

Novell also said it has hired Citigroup to explore strategic options for Celerant, Novell's consulting subsidiary.

Analysts, on average, were expecting Novell to post a profit of 13 US cents per share on US$300 million in revenue in the fourth quarter, according to Reuters Estimates.

Additional reporting by Michael Flaherty.