SCO Litigation Takes Its Toll on Bottom Line

By Peter Galli  |  Posted 2004-08-09 Print this article Print

The company is losing business due to its intellectual property battle against IBM and others.

The SCO Groups ongoing legal battle against IBM and others is having a negative impact on the company, leaving it with few new customers for its Unix software and current users reluctant to pay additional licensing fees.

Both issues are taking a serious financial toll on the company, which saw its revenue for the second quarter drop by half and sales from its SCOsource division, which licenses its Unix intellectual property, nearly evaporate.

When asked if its controversial moves had negatively affected the Lindon, Utah, companys ability to attract new clients, Jeff Hunsaker, senior vice president of SCOs Unix division, said, "Absolutely, unequivocally yes. Everybody says that President Bush has the hardest job. I think that I have the hardest job. This is a tough job."

Click here to read why Steven J. Vaughan-Nichols says the SCO-Linux wars are far from over. The decline in customer interest is evident in SCOs second-quarter financial results. The companys SCOsource divisions revenues plummeted in the second quarter to $11,000—a drop from the divisions revenues of $8.25 million for the same period last year.

Overall revenue for the second quarter also fell, to $10.1 million, from $21.4 million in the same quarter last year. It is expected to be between $10 million and $12 million for the third quarter this year.

To try to stem the tide, SCO is focusing on getting current customers to upgrade rather than bringing in new ones, said Hunsaker, who spoke with eWEEK at the SCO Forum event here last week. "Until we come to a complete resolution with our SCOsource [program for licensing intellectual property] initiatives, its going to be very difficult to get new customers," he said. "They want to see this thing resolved."

Next Page: SCOs SMB challenge.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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