| Rumors of SCO's death "greatly exaggerated" |
Jan. 16, 2007
In early January, rumors began spreading that The SCO Group -- as a consequence of poor business, Novell's demands for a share of SCO's Sun and Microsoft Unix deals, and the ever-mounting costs of SCO's IBM lawsuit -- was nearing bankruptcy.
In response to all this, SCO CEO Darl McBride has countered, "To paraphrase a line from Mr. Twain, 'the rumors of our death have been greatly exaggerated.'"
McBride defended his company's financial position Jan. 12 in a letter to SCO's partners and customers. The letter has also been filed with the SEC.
In it, McBride indicated that SCO's core Unix business was still strong. "In recent years we have provided you with key new releases of UnixWare 7.1.4 and OpenServer 6." Additionally, "We continue to work with hardware system providers to certify many of their servers with the latest SCO UNIX offerings. New hardware certifications are updated on a weekly basis from systems provided by Acer, DELL, Fujitsu-Siemens, HCL, HP, Intel and many others. These vendors continue to certify their systems for SCO UNIX because customers continue to require the reliability, security and performance that SCO OpenServer and UnixWare offer."
McBride also played up SCO's Me Inc. mobile technologies. These Java-based services are designed to enable customers and developers to create customized server-based applications that can work with mobile devices.
As he has in the past, McBride continued to insist that SCO will win in its cases with IBM and Novell. "Our efforts to protect our intellectual property continue through the legal system. We continue to believe in the merits of our cases with IBM and Novell and look forward to a successful resolution of those claims. Although we have had a few setbacks in the court proceedings, important and significant claims remain in the case."
Notwithstanding this show of optimism, 188 of SCO's claimed 294 examples of IBM contributing Unix code to Linux were dismissed in late November by the U.S. District Court in Salt Lake City. Many observers believe that the dismissed claims were the heart of SCO's case.
That said, McBride did "recognize [that] we have invested heavily in protecting our intellectual property. While we expect to continue incurring legal expenses in 2007, our expectation is that those expenses will be less than they have been in prior years. Some of the larger expenses related to IBM discovery, expert witness and technical expert reports are now behind us. With these expenditures behind us, the outlook for the Company's cash expenditures for the upcoming fiscal year is in a very manageable position."
According to SCO's last Condensed Consolidated Balance Sheet Data, which was filed on Sept. 6, 2006, the company had only $338 thousand in long term liability. SCO has already set up a payment agreement with its main law firm, Boies, Schiller & Flexner LLP, which capped its legal expenses.
On Jan. 17, SCO is scheduled to release its financial results for the fourth quarter and year ended Oct. 31, 2006, after the market's close. Afterwards, we'll all have a clearer idea of how bad, or not, SCO's financial situation really is.
-- Steven J. Vaughan-Nichols
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