SCO Posts $7.4 Million Loss

Revenue for the quarter of $11.2 million, compared with $20.1 million in the year-ago quarter, dropped in part because of dwindling SCOsource licensing revenue-but SCO's CEO says the company is "steadfast on a dual path for success."

The SCO Group, the beleaguered Unix company thats locked in an intellectual property war with IBM over Linux and Unix, reported another poor quarter Tuesday.

For its fiscal third quarter, ended July 31, The SCO Group Inc. reported revenue of $11.2 million, compared with $20.1 million in the same quarter a year ago. This was in line with SCOs third-quarter estimates.

The overall revenue drop was primarily caused by a decrease in the revenue of SCOsource, SCOs Unix licensing department, to $678,000, from $7.3 million in the year-ago quarter.

That said, SCOsource licensing revenue did increase by $667,000 from $11,000 in the previous quarter. The licensing revenue in the most recent quarter came from two companies, but SCO chief financial officer Bert Young said he could not name either customer.

According to SCO CEO Darl McBride, SCOsource revenue should improve dramatically once the Unix copyright case with Novell Inc. has been resolved. The case, which deals with the question of whether Novell or SCO owns Unixs copyright, is scheduled to come to trial Sept. 15 in U.S. District Court in Salt Lake City.

The net loss for the quarter was $7.4 million, compared with a net income of $3.1 million for the year-ago quarter.

Despite this, the net income applicable to common stockholders for the quarter was $7.5 million, or 38 cents per diluted common share. This positive income was the result of SCO netting $15.5 million from the repurchase of BayStar Capital IIs remaining 40,000 shares of the companys Series A-1 Convertible Preferred Stock.

This came about because SCO recently resolved its fight with BayStar, a former financial backer that had obtained $50 million in financing for SCO to pursue its Linux lawsuits.

SCO has sued IBM for more than $5 billion related to Linux and Unix IP (intellectual property) issues, and is also involved in related lawsuits against Novell, Red Hat Inc., DaimlerChrysler Corp. and AutoZone Inc.

BayStar attempted to force SCO to focus entirely on its IBM litigation and discontinue its Unix operating system business. SCO executives fought back and insisted that SCO continue to also operate as a Unix vendor. The two finally agreed to split, but on July 23, the Larkspur, Calif.-based private equity firm threatened to sue SCO over how the companies had agreed to dissolve their relationship.

But on Aug. 25, SCO communications director Blake Stowell announced without fanfare, "BayStar requested the $13 million and the 2,105,263 shares of SCO common stock certificates SCO owed BayStar for its $40 million worth of Series A-1 shares." BayStar has since confirmed that they had agreed to settle the disagreement without further conflict.

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