SCO's Sales Decline and Losses Mount in Fiscal Q1

Published: March 9, 2006

by Timothy Prickett Morgan

The race is on between the cash that commercial Unix distributor SCO Group has in the bank and is getting from its backers and its costs in staying in business as it tries to get to its February 2007 trial in its lawsuit against IBM.

SCO has been bleeding red ink for months, even though its core Unix business is generating cash, because of its legal bills in the IBM lawsuit and other legal woes it has with Red Hat and Novell. For the fiscal first quarter ended January 31, SCO reported that its sales dropped by 17 percent to $7.34 million, and SCO attributed the decline to competitive pressures that other platforms have been putting on its OpenServer and UnixWare Unixes for X86 machines. SCO's net loss for the quarter came to $4.58 million, or 23 cents a share, compared to a loss of $2.96 million, or 17 cents a share, in the year ago quarter. Product revenues, which means mainly Unix licenses, fell by 18 percent to $6 million, while services revenues fell by 12 percent to $1.31 million. SCOsource Unix intellectual property licensing revenues were a mere $30,000 in the quarter, but they were not that great a year ago, either, with only $70,000 in revenues. In 2003, when SCO offered IP licensing through SCOsource, it got an initial bump of money, including a big wad of cash from Microsoft--big by SCO standards, not Microsoft's.

"Despite our decrease in revenue and our increase in net loss incurred during the first quarter, the Unix business continued to generate positive cash flow," said Darl McBride, SCO's president and CEO, in a statement accompanying the results. "We are pleased with the recently announced general availability of our EdgeClick digital services and believe that with the $10 million in gross proceeds raised in our private placement in November, we can pursue our business operations and see our lawsuit with IBM through to its conclusion"

SCO has $12 million in cash and equivalents and $7.2 million in marketable securities to tide it over until the IBM trial starts in a little less than a year. Heaven only knows how long that trial will last, so that money has to stretch pretty far.