Waterloo-based software company OpenText is cutting 1,200 jobs as part of a business-streamlining plan.

OpenText Corp.’s chief executive said the company plans to cut about 1,200 positions as part of a business optimization plan.

In an open letter to stakeholders published Wednesday, Mark Barrenechea describes the cuts as a way to “put the right talent in the right places in our business, fund growth and innovation, and achieve these goals with higher productivity, lower costs and increased margins.”

The Waterloo, Ontario-based software company did not respond to questions about the scope or nature of the layoffs, but data provided by LSEG Data & Analytics showed that as of June last year, OpenText had 24,100 employees.

Barrenechea said in his memo that the job cuts would involve one-time costs of about $60 million but would result in savings of about $150 million annually.

The move will be in conjunction with plans to create 800 new positions across sales, professional services and engineering, and marks a new chapter in the company’s history.

In the letter, Barrenechea titled the chapter “OpenText 3.0 – Rethinking Information” and said it builds on the company’s earlier stages of focus on content management and then cloud information management.

The new phase takes the form of a three-year plan focused on innovations in cloud computing, security and artificial intelligence.

Barrenechea said that in the cloud computing segment, the company will look for ways to automate and increase employee productivity, and in the artificial intelligence segment, it will look for ways to transform business processes.

The company will strive to deliver security and compliance for global enterprises across all its technology solutions.

“We are very excited about continuing our growth and increasing our market share by helping our customers transform,” said Barrenechea.

“In addition to our plans to pursue significant margin expansion opportunities and implement strong capital allocation, we are confident that we will deliver significant long-term value for all of our stakeholders.”

Richard Tse, an analyst at National Bank of Canada, believes the moves will provide “some organic growth in the interim period until the company can become more active in acquisitions.”

“Overall, we believe the actions above portend challenging near-term operating results, including our upcoming fourth-quarter results,” he wrote in a note to investors.

OpenText earned $98.3 million in the most recent quarter, up from $57.6 million a year earlier.

The company’s revenue totaled $1.4 billion in the third quarter, up 16 percent from $1.2 billion in the same period last year.

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

This report by The Canadian Press was first published July 3, 2024.

Companies in this article: (TSX:OTEX)

Tara Deschamps, The Canadian Press