Tackling The Bloat At NovellRichard Brandt
In his final years before retiring as CEO in March, Raymond J. Noorda spent millions on acquisitions to erect a software empire at Novell Inc. Now, just four months into the job, CEO Robert Frankenberg is about to chop the company back down to size.
Frankenberg, a former Hewlett-Packard Co. vice-president, is knee-deep in a game plan to reorganize and streamline Novell. His first step: layoffs. Frankenberg isn't talking, but insiders say 1,000 to 1,500 jobs, as much as 15% of Novell's workforce, could be cut during the next few weeks. Frankenberg also may shed marginal products--even entire divisions.
Analysts expect WordPerfect Corp., the Orem (Utah) word-processing company that Novell acquired in June, to bear the brunt of
the layoffs. WordPerfect is notoriously bloated, with productivity that's only half that of Novell's (chart). "We're looking for efficiencies in the or-
ganization," confirms WordPerfect President Adrian Reitveld.
Novell, the king of networking software, could use a good trimming. The latest version of its NetWare software has not been a barn burner. Acquisitions helped boost revenues 45%, to $407 million, in the second quarter, ended Apr. 30. But excluding a one-time gain from a software-license sale, profits dropped 7%, to $75 million.
FIGHTING FOR TURF. What's more, Novell has more to fear than ever from its old nemesis--Microsoft Corp. Microsoft's recent settlement with the Justice Dept. will do little to change its aggressive tactics. And the software powerhouse is expected to build networking software into future products, making a separate network operating system, such as NetWare, moot.
Noorda tried to match Microsoft's clout with acquisitions.
By contrast, Frank- enberg wants to sell off software that doesn't help Novell defend its networking turf. The first thing to go could be Novell DOS, a personal-computer operating system that has only
a minuscule share of the market. He may also end WordPerfect's famed free customer service.
Can Frankenberg simultaneously cut Novell's costs, bulk up for its fight with Microsoft, and keep customers happy? Novell had better hope its new CEO is as much magician as manager.