Slimline Novell promises to stop stuffing channel

Novell has given a long-term pledge to stop overloading its channel with stock as the networking software vendor finally revealed it would make 1,000 redundancies worldwide.

The software manufacturer has stopped offering distributors rebates for buying products in bulk.

Novell, which has traditionally used the rebates as a vehicle for inflating financial results, claims it will only meet customer demand for products rather than ?stuff? its channel.

Tom Schuster, Novell vice president of Northern Europe, said: ?For this third quarter, distributors should only replenish when they really need to. We have taken this decision with our channel partners.?

Azlan managing director James Maunder said the channel stuffing problem had reduced margin from 20 per cent to zero over the past five years.

?Distributors have come to rely on rebates and marketing funds to make margins,? he said. ?I am totally delighted but I don?t think it will last long ? maybe a couple of months. It doesn?t really clear up the problem because there?s just so much product around.?

Peter Rigby, divisional manager for networking at CHS Electronics, said: ?With the best intentions it is trying to make this permanent, but we shall just have to wait and see.?

In the quarter ended 30 April, Novell reported a turnover of $273 million and a net loss of $14.6 million.

As predicted, Novell will reduce its workforce by 18 per cent ? a drop of about 1,000 employees, including 50 in Europe (PC Dealer, 21 May).

The company?s decision to cut inventories will result in an operating loss in the next quarter, while the redundancies are estimated to create a one-time restructuring charge of up to $35 million.