SCOs McBride Stays the Course

 
 
By eweek  |  Posted 2004-08-16 Email Print this article Print
 
 
 
 
 
 
 

Q&A: The company's CEO says he sees prospects in maintaining both SCO's customer base and its litigation.

The SCO Group Inc. earlier this month hosted its SCO Forum in Las Vegas, where the focus was less on litigation and more on product upgrades and road maps. Darl McBride, SCOs CEO, talked with eWEEK Senior Editor Peter Galli about the challenges and opportunities facing the Lindon, Utah, company.

It is clear that SCO is paying a price for all the litigation and that you are having a hard time broadening your customer base. Is it all worth the cost?

When I joined the company, that syndrome was already in effect. The day that I joined and asked about the new customers we were signing up, I was told that there really werent any. That was almost a year before any lawsuit was filed.
So theres no doubt that the company was coming down. We were going to go to market with IBM on this big Project Monterey, then that goes away, they pull the plug on us, we wake up and theyve embraced Linux.
We made our stab at trying to work in the Linux environment, but that didnt bear any fruit, so we circled back to our core competency on the Unix side. Innovation is the first step to addressing that imbalance, which we are doing with our core products, OpenServer and UnixWare.

So, do you see that business growing any time soon?

I think on the upgrade side, its highly likely. I think on the net new customer side, there is a big battle out there right now between Linux and Unix and whats going on in the courtrooms, and that will go a long way to determining whether we have booming net new customers or a modest amount of net new customers. We have a huge installed base and have shipped millions of operating systems, many of which are still running today. So that business model is very sound. We think that the upside on the core customer base is very enticing, independent of the lawsuit.

Click here to read more about SCOs litigation taking a toll on its bottom line. Unix continues to lose market share to Linux and Windows. SCOs business is based on Unix. How do you stop that attrition and grow?

As long as IBM is out there putting life-support systems around Linux, were going to have a very tough time stopping the market-share slide. We have gone from 40 percent market share down to below 10 percent. We were the volume leader, and now Linux is, and it is replicating our Unix business and being given away for free.

SCOs business model doesnt look very pretty if you remove any payouts as a result of the pending litigation from the equation, does it?

If you took the litigation off the table, there is not a lot of basis to invest in the company. But I think the company can be around for a long time because of the legacy of keeping customers running, but that would be on a much smaller scale, and there would be no excitement. We just want our business back, which was snatched from us illegally. We have put those claims in front of the courts; well get in front of them and win, and well be back in the game. If we dont win the case, well be back where we were when I joined, which is a much less substantial company.

The SCO-Linux wars are far from over, Steven J. Vaughan-Nichols says. Click here to read more. Are you disappointed by the low level of revenue being generated by your SCOsource licensing division? You made just $11,000 last quarter from SCOsource.

We were initially disappointed, but where we are right now, were encouraged that people continue to sign up. We gave guidance on our last [earnings] call that we would have a six-figure SCOsource revenue stream the third quarter, which is a big increase over $11,000, but its still nothing to write home about. But it is encouraging that some companies are stepping up and are removing the risk from their technology shops.

Will you consider raising more capital?

We dont need to right now, but, sure, it could be in the cards. A year ago, we had $4 million in the bank, and now we have about $50 million, so we have two to three years of cash available, and we are supposed to be in the IBM courtroom in five quarters, so there is really no need to raise cash, especially given where our stock is. We dont need cash, and it would also be highly dilutive to us right now, and we expect to be in the courtroom well before the cash is expected to run out. So, generally speaking, were in pretty good shape right now from a financial point of view.

What do you think of Sun [Microsystems Inc.] comments about Novell Inc.?

I think that the net outcome of such a potential deal would be good for us. We obviously compete with Sun and with Microsoft [Corp.] as we are all out there trying to sell operating systems, but the general alignment we have with those guys is good and will continue to be good into the future.

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