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The SCO Group Inc. on Thursday reported a boost in profits and revenue for its fiscal third quarter, including $7.3 million of revenue from its controversial Unix-licensing efforts.
In fact, the companys SCOsource licensing efforts boosted the company to a profit. SCO reported net income of $3.1 million on revenue of $20.1 million, versus a loss of $4.5 million on revenue of $15.4 million for the same quarter last year.
SCOsource generated $7.3 million in revenue and contributed $5.6 million to gross margin, while SCOs operating systems produced $12.8 million in revenue, the company said.
“These [SCOsource] activities have nearly tripled our cash balance and strengthened our balance sheet,” said Darl McBride, president and chief executive of SCO, in a conference call with analysts Thursday morning.
In the conference call, McBride said the company was determined to continue the fight. “We have a very strong resolve to defend our intellectual-property assets,” he said. “We have pretty thick skin at this point. We have a lot of people throwing rocks here. … Weve been called into a fight, and were not backing down.”
SCO spent less than half of its legal budget for the quarter—approximately $700,000, McBride said—which will be recorded as part of a “cost of sales” item on the companys balance sheet. “Weve still got a huge budget,” he said.
McBride disclosed that the companys first Fortune 500 licensee received a small discount from the licensing terms revealed last week. SCO has said previously that it intends to license its Unix System V patent portfolio to customers for approximately $699 per CPU per server, with the amount doubling in October. The Fortune 500 customer received a “slight discount” to the $699 fee, McBride said.
“Its a positive sign for the future for the licenses and the licenses that will flow from that,” McBride said.
SCO continues to invite companies to visit the companys headquarters in Lindon, Utah, to view the disputed code under a nondisclosure agreement, SCO executives said. More details of the disputed code and SCOs licensing activities will be detailed in a Monday session next week at SCOForum, the companys developer conference in Las Vegas.
“Its a strange situation—they continue to say we wont show the code, and we continue to offer it up,” McBride said of the companys detractors.
Next page: What SCO plans next.
Whats Ahead for SCO
For SCOs fiscal fourth quarter, ending Oct. 31, SCO expects to record revenue in the range of $22 million to $25 million, based in part on new licensees for the SCO code, executives said. The company expects revenue from the companys “heritage” products will remain roughly level over the next few quarters, said Robert Bench, SCOs chief financial officer, on the call.
McBride contended that the Linux camp had shifted its position from one where they admitted no wrongdoing, to one where the Linux community was more willing simply to remove the offending code. “The point is that we have had code misappropriated, and we do need to get compensation for that, and its not just as simple as getting code and moving on,” he said. “So as we move forward, we expect to gain support for our position, and our credibility will rise as we go forward.”
McBride also argued that he believed most software companies actually supported SCOs position. “I believe the silent majority is actually behind SCO in this case,” he said. “If you take any company that has IP, they will want to protect it—they want to be behind SCO in this case because theyll be able to monetize the software that theyve developed over the years.”
Basing a company on the GPL, conversely, is like building a company on “quicksand” McBride added.
“We think one of the big problems with the GPL is that in it you see in big bold letters, You get no warranties for use of this license,” he said. “You got this product for free; dont expect any warranties for it.”
Although Wall Street has noticed that some SCO executives have begun to sell off shares of their stock, McBride, a SCO shareholder since 2000, said he had not sold a single share of stock, and had no plans to do so.