SCOs Revenue Continues to Plunge

By Steven Vaughan-Nichols  |  Posted 2005-04-13

SCOs Revenue Continues to Plunge

Good news continues to be hard to find for SCO as it reported, after the markets close, still more losses and revenue decreases in its first quarter of 2005, which ended on Jan. 31.

The SCO Group Inc. has been locked in battles with IBM and other companies over its Unix intellectual property rights, whether any of its Unix code has been stolen into the popular Linux operating system, and other contractual matters, and has continued to see its Unix business decline without seeing any significant victories in the courtroom.

Revenue for its first quarter amounted to $8,865,000. Last year, the company had realized $11,392,000 from the comparable quarter.

Bert Young, SCOs CFO, blamed the decrease on "the continued competitive pressures on the companys Unix products and services."

Multiple industry studies have shown Intel-Unix customers, the core of SCOs business, moving from Unix to Linux for their server operating system needs.

In addition, SCO still has not been able to make headway with convincing users that they should pay SCO for its Unix intellectual property. The branch of SCO concerned with this revenue stream, SCOSource, reported gross income of only $70,000.

SCO was able to report one small silver lining to its financial gray clouds for the second quarter.

Young said that the company had recently sold its holdings in TrollTech, a software development company, for over $800,000.

Since SCO had previously written this investment off, all of this amount will be taken as revenue in this still ongoing quarter.

Still, the net loss attributable to common stockholders for 2005s first quarter $2.961 million, or 17 cents per diluted common share, as compared to a net loss attributable to common stockholders of $2.486 million, or 18 cents per diluted common share for the prior years comparable quarter.

"Despite the decline in revenue, we successfully implemented efficiency and cost reduction measures that have had a positive impact on operations and contributed to the Unix business operating profitably," said Darl McBride, SCOs CEO.

"We remain steadfastly focused on winning in both the court room and in the marketplace. We are continuing to develop new products and services for the Unix platform that will benefit our customers," added McBride.

Next Page: Optimism with Legend.

Optimism with Legend

In particular, as McBride told several weeks ago, with the OpenServer 6 product code-named Legend, "we are arresting the downward slide in product sales and revenue a bit; after all, we have been in a five-year revenue slide.

"But there is optimism from the current installed base towards the new product," McBride said.

SCO will be releasing Legend in June.

SCO resellers that spoke to agreed that they are seeing customer interest from SCO OpenServer and UnixWare customers.

McBride commented that OpenServer 6 was SCOs most important launch in years.

During SCOs Tuesday teleconference, McBride again emphasized that while SCO was not backing off its court cases, it had great hopes that SCOs Unix business would revive as Legend enters the market.

Despite its recent losses, SCO claims to still have cash and cash equivalents, and available-for-sale securities were $15.5 million at Jan. 31.

The company also has $4.798 million in an escrow account. These funds have been set aside for its attorneys.

"Our net cash position after backing out the costs of litigation that have been paid and budgeted for under our agreement with our legal counsel remains steady," said Young.

"Combined with the fact the Unix business is generating cash, we believe we are in a position to continue operating our core business and see the litigation through to its conclusion," Young said.

The panel is expected to announce whether SCO will be permitted to continue to be traded on the Nasdaq in the next few days. Until then, SCO will continue to trade under the symbol SCOXE.

Young said that as SCO has now met all of Nasdaqs requirements, he hopes that the "E" will be removed from SCOs trading symbol within a few days.

Click here to read more about SCO filing its amended paperwork.

McBride also accused popular legal news site Groklaw of being a front for anti-SCO parties and that its editor, Pamela Jones, isnt who she says she is.

McBride said, "if you look at the reality of the Pamela Jones situation, you have to conclude that all is not as appeared as it is in Groklaw land. We appreciate that many media sources disagree with us, but theyre accountable. We think you need to know whos behind the news."

SCOs CEO would not go so far as to say Jones was working for IBM, but "were digging into who Pam Jones is, and were close to the bottom."

When Jones was asked about this, she replied, "As far as credibility, SCO might try to get as much as I have earned. America was founded by anonymous pamphleteers. Its an honored American tradition."

Jokingly she added, "The truth is, Im an alien from a galaxy far, far away."

SCOs most surprising news, though, wasnt connected with its income, lawsuits, enemies or the market.

It was that SCO, according to McBride, has reviewed Suns plans to open-source Solaris, which is based on SCOs Unix, and he found no problem with what Sun is planning to do and that it will not hurt SCOs Unix intellectual property rights.

Check out eWEEK.coms for the latest open-source news, reviews and analysis.

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