| SCO's red ink disgorge persists |
Sep. 06, 2006
The SCO Group, Inc. reported its financial results for its third quarter ended July 31, 2006 on September 6th. It wasn't pretty.
Revenue for the third quarter of fiscal year 2006 was $7,421,000 as compared to $9,353,000 for the comparable quarter of the prior year. The net loss for the third quarter was just over $3.5 million or 17 cents per diluted common share, as compared to a net loss of just over $2.3 million or 13 cents per diluted common share, for 2005's comparable quarter.
"The decrease in revenue and increase in net loss were primarily attributable to continued competitive pressures on SCO's Unix products and services from Linux," SCO CFO Bert Young said in a conference call.
For the year to date, revenue for the nine months ended July 31, 2006 was close to $22 million as compared to $27.5 million for the nine months ended July 31, 2005. The net loss for the nine months ended July 31, 2006 was almost $13 million or 62 cents per diluted common share, as compared to last year's net loss of $7.3 million or 41 cents per diluted common share.
"Legal and other expenses incurred in connection with the Company's litigation were $2.3 million for the third quarter of fiscal year 2006, which was down from costs of $3 million for the third quarter of fiscal year 2005 and down from costs of $3.7 million for last year's second quarter. Because of the unique and unpredictable nature of this litigation, the occurrence and timing of litigation-related expenses is difficult to predict, and will be difficult to predict in the future," said Young.
Recently, though, SCO has suffered nothing but reverses in its Linux litigation. In June, U.S. District Court Magistrate Judge Brooke Wells dismissed about two-thirds of SCO's claimed 294 examples of IBM contributing Unix code to Linux.
Darl McBride, SCO's president and CEO spoke only briefly about the company's self-inflicted legal wounds. He said that SCO was still sure that it would be proven right in the courts. He then immediately moved on to discussing SCO's success in its new mobile software business -- Me Inc.
In its own small way, SCO's Me Inc. has been more successful than the company's Unix offerings. SCO has established several Me Inc. partnerships with other vendors, the most promising of which was getting Me Inc. into Microsoft's VSIP (Visual Studio Industry Partner) Program. According to McBride, SCO has also been successful in getting independent programmers to work with the Me Inc. toolkit.
McBride also added that the customers who thought SCO was going to go under are gone now, and that the existing customer base will be sticking the course with SCO OpenServer instead of switching to Linux or Windows.
For new customers, though, McBride confessed that because SCO OpenServer doesn't have software certifications from ISVs (independent software vendors) like Oracle, it has had great trouble winning new accounts.
Earlier in the call, however, McBride had said that "Many aspects of the company's business are on the right track if we can continue to attract new customers." Aye, there's the rub.
SCO still has some money in its piggy-bank, though. Cash and cash equivalents, available-for-sale marketable securities, and restricted cash to be used for certain legal expenses totaled $15.5 million at the end of the latest reported quarter. So it is, Young said, that SCO can still pursue its litigation while maintaining its Unix business and its new mobile computing software development offerings.
The SCO-IBM litigation is now scheduled to go to court in February 2007, and SCO is, despite everything, looking forward to its day in court, McBride said.
McBride added that he was "excited to be going down the home stretch," and that SCO was looking forward to "putting the litigation behind us so the company can focus more on its Unix resellers, customers and its new Me Inc. business."
-- Steven J. Vaughan-Nichols
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