Yes, he's gone. Vals Varano, Apisphagus Thryx and a number of Dark Elven mercenaries are with him. They are traveling by carriage to Kragenmoor first, via Teyn and Omaynis. %Name thinks they cannot have made it very far, if you want to follow them -- perhaps you may find them somewhere on the road west of Teyn.

I came to Morrowind to collect my new axe and take care of those troublesome letters. Now that my business is concluded, I naturally need to get back to my dear lady wife.