SCO Reports $6.5 Million Loss

The Unix company's IP sales continue to sag as the company's overall revenue falls to 10.1 million.

The SCO Group Inc. on Tuesday reported a loss of $6.5 million, or 37 cents per share, in its latest quarter, which ended Oct. 31.

The litigious Unix companys revenue fell to $10.1 million, down from $24.3 million a year ago, when the company suffered a fourth-quarter loss of $1.6 million or 12 cents per share. Dion Cornett, a financial analyst with Decatur Jones Equity Partners, had predicted that SCO would only lose 18 cents a share on $10.8 million in revenue.

Darl McBride, SCOs president and CEO, blamed the revenue drop on the competitive market for its Unix server products and the companys declining Unix IP (intellectual property) license revenues. In last years fourth quarter, its SCOsource revenues amounted to $10.3 million. In this most recent quarter, SCOs IP revenue came to only $120,000.

Nevertheless, McBride insisted that licensing revenues would bounce back. "There is continued interest in the licensing of our Unix technology, and we believe that when our legal claims are substantiated in a court of law, we will see an increase in the demand for this licensing business," he said.

In large part, the vast difference between 2004s fourth-quarter revenue and the fourth quarter of 2003 is because then SCO had realized income from IP deals with Microsoft Corp. and Sun Microsystems Inc. Except for those two major licensing agreements, SCO has been largely unsuccessful in finding customers willing to pay for its Unix IP property.

Despite this glum financial news, McBride remained positive. "I am pleased to say we have continued to further our business objectives in the fourth quarter and ended the year on an upbeat note."

In particular, McBride pointed to SCOs Unix offerings. "Our core Unix business is generating meaningful cash flow and is poised to continue that trend into our 2005 fiscal year. As an organization during Q4, we continued to innovate and to introduce new programs like SCO Marketplace [a third-party developer program], and we successfully capped our attorneys fees."

McBride said SCO will continue to focus on both its Unix products and its legal claims. "The combination of the solid operating results in our Unix business and the cap on the costs of litigation will ensure we can remain steadfastly focused on driving success in both the marketplace and in the courtroom, and demonstrate our focus on taking whatever steps are necessary to ensure success in both areas."

/zimages/4/28571.gifClick here to read about SCOs plans to launch a Web site to present its side of the story of its IP fights with IBM and Novell.

As for SCOs Unix offerings, McBride said he believes that the companys release of a major upgrade to OpenServer, the companys low-end Unix server offering, code-named Legend, which is now scheduled for the second quarter of 2005, will do well for SCO and its partners.

"We believe the release of Legend will strengthen the overall ecosystem of partners, developers, customers, and resellers that rely on OpenServer and will also present SCO with opportunities to upgrade our current installed base."

SCO had previously said at SCOForum, SCOs annual reseller conference, that Legend would arrive in the first quarter of 2005. McBride explained that the delay was due to the beta process and that SCO is "just getting everything tightened down before it goes out."

Next page: Legal developments.