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Novell posts loss, announces layoffs

As part of its third-quarter earnings report, the networking-software maker announces that it has cut 10 percent of its work force in an effort to turn a profit in the fourth quarter.

As part of its third-quarter earnings report Thursday, Novell announced that it has cut 10 percent of its work force in an effort to turn a profit in the fourth quarter.

The networking-software maker, which recently turned its attention to Linux, managed to slightly improve its year-over-year revenue growth. But net profits fell into the red.

Novell generated revenue of $283 million during the quarter that ended July 31, compared with $282 million for the same period last year. Analysts expected the company to generate revenue of $278 million, according to First Call.

Meanwhile, the company posted a net loss of $12 million, or 3 cents a share, compared with a profit of $10 million, or 3 cents a share, a year ago. Novell's quarterly performance matched analysts' estimates, according to First Call.

"We are encouraged by our third-quarter results," Novell CEO Jack Messman said in a statement. "We took significant steps to improve Novell's business performance through cost-cutting measures intended to enhance our profitability beginning in our current fourth quarter."

Novell cut most of the 600 positions during the third quarter, bringing its global work force to 5,700 at the end of the quarter. The company is hoping to save roughly $100 million in operating expenses.

The quarter was also marked by Novell's Linux strategy and related acquisitions. Last June, Novell announced its Nterprise Linux Services software package, which is due to ship by the end of this year.

And in August, Novell acquired Ximian--a move designed to help its customers adopt Linux on the desktop. Although there was speculation Novell would nix its NetWare operating system in favor of Linux, Messman says that won't happen.

"Novell is not diminishing support for its NetWare product line," Messman said. "We are adding Linux. Novell plans to deliver a full range of solutions to help customers maximize the value of investments in Linux and open source."

And this Linux effort is expected to bolster Novell's NetWare business, said Drake Johnstone, an analyst with Davenport & Co.

"What I assume is (that) Linux will stabilize and eventually help grow the NetWare business," Johnstone said. He added that Novell's total revenue is expected to increase 14 percent to 15 percent next year and that the company may earn 20 cents to 25 cents per share during fiscal 2004.

Shares of Novell rose in after-hours trading to $3.96 on the Island ECN electronic marketplace. During the regular session, Novell closed up 4 cents a share, or 1.07 percent, to $3.77 on Nasdaq.