New Customers

By Steven Vaughan-Nichols  |  Posted 2004-08-31 Print this article Print

?"> Still, SCOs ongoing legal battles are continuing to negatively affect the company, leaving it with few new customers for its Unix software and making current users reluctant to invest in new SCO product offerings.

According to Jeff Hunsaker, senior vice president of SCOs Unix division, SCO has been finding it "very difficult to get new customers" and is focusing on keeping its installed base.

Despite this, the Unix division has returned to profitability. This return was helped in part by the continued support of SCOs resellers, as well as the fact that the company is in the process of restructuring itself. SCO also has announced upgrades to its OpenServer and UnixWare lines and new software offerings.

But the company plans on continuing to restructure by closing some smaller offices and merging them into larger ones. And layoffs, in both the Unix and SCOsource divisions, have not been ruled out.

To help manage its finances, SCO is renegotiating its legal fees agreement with its primary IBM litigator, the law firm of Boies, Schiller & Flexner LLP. In this revised fee agreement, in return for giving the law firm as much as 33 percent of any settlement awards resulting from SCOs lawsuits, the overall cash cost of SCOs litigation has been capped at $31 million in cash and securities.

SCO also announced that it has adopted a shareholder rights plan. This is designed to deter hostile takeover tactics—including the accumulation of shares in the open market or through private transactions—and to prevent an acquirer from gaining control of SCO without offering a fair price to all of its shareholders.

IBMs new motion on Linux aims to "call SCOs bluff," one attorney says. Click here to read more. McBride said the shareholder rights plan was not a result of the BayStar fight, although that conflict had aspects of an attempted hostile takeover, or because of any current attempt to take over SCO. Instead, he said the move stemmed from the SCO boards concern about the companys currently low stock price compared with its long-term value. It is SCOs fear that with a current market cap of slightly more than $58 million, IBM—or an opportunistic group—might try to take over SCO.

"The plan will not prevent a takeover attempt, but should encourage anyone seeking to acquire the company to negotiate fair value directly with the board of directors," SCO chairman Ralph Yarro III said in a statement.

The plan will be triggered if a person or group acquires, or attempts to acquire, ownership of 15 percent or more of SCOs common stock. In the event of a takeover attempt, the board would decide whether the offer being made is fair to common SCO stockowners.

Looking ahead, McBride said SCO is staying "steadfast on a dual path for success both in marketplace and in the courtroom." Adding that the company isnt interested in having a "shouting match" or a "boisterous fight" with Linux supporters, he said SCO will "confine our arguments to the courtroom."

McBride said he remains convinced that SCO will triumph in the courtroom. But the stock market is showing signs of doubt, as prior to the aftermarket close announcement, SCO stock dropped 3.31 percent to a near 52-week low of $3.80 a share on light trading.

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Steven J. Vaughan-Nichols is editor at large for Ziff Davis Enterprise. Prior to becoming a technology journalist, Vaughan-Nichols worked at NASA and the Department of Defense on numerous major technological projects. Since then, he's focused on covering the technology and business issues that make a real difference to the people in the industry.

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