SCO Litigation Takes Its Toll on Bottom Line

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."

/zimages/4/28571.gifClick 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.