SCO Continues to Lose Money

Linux and a lack of SCOsource licensing revenue continue to push SCO's revenue down, but OpenServer 6 is doing well so far.

SCO, the company best known for Linux litigation and its Unix operating systems, reported results for its fiscal third quarter ended July 31, 2005, on Wednesday. The news wasnt good.

Revenue for the third quarter of fiscal year 2005 was $9.3 million as compared to $11.2 million for the prior years comparable quarter. This was a slight uptick over the second quarter of 2005, in which the Lindon, Utah-company realized $9.2 million.

For common stockholders, the net loss for the third quarter was over $2.4 million, or 13 cents per diluted common share.

This was a far cry from the third quarter of 2004, when common stockholders realized a profit of 38 cents per share.

That 2004s quarter unusual result was due to a one-time capital contribution of almost $15 million.

This positive income a year ago was the result of SCO netting $15.5 million from the repurchase of BayStar Capital IIs 40,000 shares of the companys Series A-1 Convertible Preferred Stock after a battle with the venture capitalist over control of the company.

/zimages/1/28571.gifClick here to read more about the fight between The SCO Group and BayStar Capital.

Despite the losses, "the third quarter was a productive quarter for SCO," said Darl McBride, president and CEO of The SCO Group Inc.

McBride said this because "Our Unix business operated profitably for the third consecutive quarter and we launched SCO OpenServer 6, which has received many favorable reviews and is showing traction with customers.

During a question and answer session following the teleconference, McBride elaborated, "Reseller feedback very positive. Its still early to tell how far the traction will go." But, McBride went on, "MySQL, and other companies with large footprints, announcements of support shows that our partners are supporting OpenServer."

"One company ripped out a 200-server Red Hat implementation and replaced it with OpenServer 6," said McBride.

"Without OpenServer 6, wed be looking at a very different picture and we wouldnt be talking about people replacing Red Hat with OpenServer."

McBride also said that SCO is well positioned to continue its legal actions to their conclusion.

SCO CFO Bert Young noted, in a response to an investor question, that "without the legal fees, SCO would have been profitable."

SCO is currently engaged in cases against IBM and Novell.

/zimages/1/28571.gifRead more here about Novell fighting SCO in court.

For the quarter, SCO recognized its legal and professional fees as $3.1 million.

This included a $2 million payment to its main law firm, Boies, Schiller and Flexner LLP.

With $12.6 million left in cash and $3.6 million in escrow and only two $2 million payments left to be made to Boies, SCO is in no danger of running short on cash for its ongoing litigation.

/zimages/1/28571.gifTo read more about SCOs actions against companies that use Linux, click here.

McBride also mentioned that SCO was planning to premier a "unique product and platform that will take Unix into the next generation of communications" at the DEMO emerging technology show in early 2006.

While he wouldnt go into any detail about the announcement, he did say that it had to do with wireless hubs and handset management. SCO will be announcing more about the new product, which will build on SCO Unix represents a new angle for the company, at a launch event in New York later in September.

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