In a report released yesterday, PaineWebber analyst Don Young said the Provo, Utah-based company may be planning to cut more than 1,000 jobs in an effort to recover from three quarters of lackluster sales.
The company faces increased competition from Microsoft, which earlier this year unveiled Windows 2000, its new computer operating system for businesses.
Novell executives were unavailable to comment.
Analysts said the company has had problems morphing its business from its roots as an operating systems company to a provider of Internet infrastructure software.
"The company is under tremendous pressure as its core product line fades, and the new products aren't yet material enough to offset the slowing revenue growth," said Morgan Stanley Dean Witter analyst Chuck Phillips.
In recent weeks, Novell executives have been hinting that some form of streamlining was on the horizon.
During its third-quarter earnings conference call Aug. 16, Novell management said it would move to "align the company with the current revenue environment and position for better profitability."
Analysts said the company has to do something to turn things around.
"Novell has not shown the upward growth path that they should have. If they are indeed cutting their work force, it's not a surprise," said Jamie Lewis, chief executive for industry consultants The Burton Group.
Novell employs 5,400 workers in more than 35 countries, mainly the United States, United Kingdom and India, according to its Web site. If it lays off 1,000 people as the analyst predicted, it will lay off almost 20 percent of its staff.