Waterloo software firm OpenText cuts 1,200 jobs as part of business optimization plan

OpenText Corp.'s chief executive says the company plans to shed about 1,200 roles as part of a business optimization plan.

In an open letter to stakeholders released Wednesday, Mark Barrenechea describes the cuts as a way of "placing the right talent in the right locations of our business, funding growth and innovations, and completing these objectives with higher productivity, lower cost, and expanded margin."

The Waterloo, Ont.-based software company did not answer questions about the extent and nature of the layoff, but data provided by LSEG Data & Analytics showed OpenText employed 24,100 staff last June.

Barrenechea's note said the job reduction will come with one-time costs of about $60 million but will generate about $150 million in savings per year.

The move will be combined with plans to create 800 new roles in sales, professional services and engineering and comes as the company is ushering in a new chapter.

Barrenechea's letter called that chapter "OpenText 3.0 Information Reimagined" and said it builds on former stages of the company that centred on content management and then information management based in the cloud.

The new stage taking the form of a three-year plan focused on cloud, security and artificial intelligence innovations.

In the cloud segment of the business, Barrenechea said the company will find ways to automate and drive productivity for workers, and in the AI portion, it will seek out ways to transform business processes.

Across all of its technology, it will work to ensure it offers security and compliance for global businesses.

"We are very excited about opportunities going forward to continue our growth and increase our market share by helping our customers transform," Barrenechea said.

"Along with our plans to pursue large margin expansion opportunities and execute on strong capital allocation, we are confident we will deliver significant long-term value for all our stakeholders."

Richard Tse, an analyst with National Bank of Canada, believes the moves will drive "some organic growth in the interim until the company can pursue a more active level of acquisition activity."

"Overall, we believe the above actions signal challenging operating results in the short term, including the upcoming FQ4 results," he wrote in a note to investors.

In OpenText's most recent quarter, the company earned US$98.3 million, up from US$57.6 million a year earlier.

Its revenues for what was the third quarter totalled US$1.4 billion, up 16 per cent from US$1.2 billion during the same period last year.

During the quarter, the company completed the divestment of its AMC business to Rocket Software for US$2.3 billion in cash before taxes, fees and other adjustments.