| SCO's FY06 results: not a pretty picture |
Jan. 17, 2007
The SCO Group Inc. on Jan. 17 reported financial results for its fourth quarter and fiscal year ended Oct. 31, 2006. Had Warren Zevon been a business reporter, he might have described SCO's latest fiscal year as "not that pretty at all." He would have been right.
SCO's revenue for the fourth quarter of fiscal year 2006 was $7.349 million, a decline of over a million dollars from $8.528 million for the comparable quarter of the prior year. The company managed to staunch its losses to a degree. The net loss for the quarter was $3.743 million, or $0.18 per diluted common share, as compared to a net loss of $3.431 million, or $0.19 per diluted common share, for the comparable quarter of the prior year. Darl McBride, president and CEO said in a conference call that "The decrease in revenue was primarily attributable to continued competitive pressures on the company's Unix products and services."
As the quarter's data indicated, the overall revenue for SCO's 2006 fiscal year, which also ended on Oct. 31, continued its downward slide. Revenue for the year ended Oct. 31, 2006 was $29.239 million as compared to $36 million for the year ended Oct. 31, 2005. This resulted in a net loss for the year ended Oct. 31, 2006 of $16.598 million or $0.80 per diluted common share, as compared to a net loss of $10.726 million, or $0.60 per diluted common share, for the prior fiscal year.
"Even though competition is strong and continues to impact our revenue and operating results, we are continuing to develop and promote our Unix solutions and mobile services strategy, as we believe that the market, as well as the benefits to our customers and partners, are significant," said McBride.
"During the fourth quarter we made adjustments to our operating model and eliminated certain costs. We believe these cost adjustments will allow the Unix business to return to generating positive cash flow for the 2007 fiscal year," continued McBride
SCO CFO Bert Young explained that "these cost adjustments" were due to employee layoffs. The company decreased its head count by 24, from 166 staffers to 142. "These cuts were made across-the-board," said Young. Later in the conference call, McBride added that there may be other minor layoffs in the coming year.
On a more positive side, McBride was high on the company's progress in the development of its Me Inc. mobile services platform and applications. That said, McBride also admitted that its mobile services platform was "a wild card and so I can't give guidance on it."
Perhaps the most substantive Me Inc. deal is SCO's strategic business partnership with Day-Timers Inc. to develop, market, merchandise, and support a suite of Day-Timers branded mobile solutions for business and personal productivity. SCO expects to begin shipping the solution during the second calendar quarter of 2007.
SCO won't "walk away from this fight"
McBride also said he remained committed to "defending our intellectual property through the legal system." While SCO has had its nose bloodied recently in its Novell and IBM cases, the company is not going to back off, according to McBride. "The last thing we'll do is walk away from this fight," he said.
With $12.6 million in cash and cash equivalents, and with several million in an escrow account for legal expenses, SCO sees no trouble seeing the cases through. In the last quarter, SCO incurred $2.22 million legal expenses, which was down from $3.38 million for the comparable quarter of the prior year, and down from $2.315 million for the third quarter of fiscal year 2006. In any case, the "heavy bulk of the legal expenses are in the rear-view mirror, said McBride.
McBride dodged giving a direct answer, as CEO, to Novell's claims that bankruptcy lies ahead for SCO. Personally, McBride said, "That's not what's keeping me up at nights." Still, he also said "our numbers don't make a pretty picture." However, McBride also said that the company will be presenting its side of the matter in its Novell case in the U.S. District Court in Utah on Tuesday, and that he is not worried about the possibility of bankruptcy.
So, while SCO's business continues its decline, the company remains committed to its Unix business, its new mobile business, and -- for better or for worse -- its lawsuits.
-- Steven J. Vaughan-Nichols
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