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SCO's Linux Billions?

Embattled Unix vendor and Linux litigant SCO continues to bleed losses but is still hoping for Linux billions and legal success.

In a short conference call announcing the company's second-quarter 2007 results, SCO CEO Darl McBride reiterated his confidence that SCO would be successful in its product and legal endeavors. But a recent legal filing and SCO's own financial results contradict McBride's current optimism.

SCO said its net loss for the second quarter of 2007 was $1.14 million, or $0.05 per diluted common share, which is an improvement over the $4.69 million, or $0.22 per diluted common share, that SCO reported for the second quarter of 2006.

Part of the reduced losses comes from a decline in SCO's litigation costs, which were only $1.07 million in the second quarter of 2007 compared to $3.76 million during the same quarter in 2006.

The reduced loss was also accompanied by a decline in revenue. SCO reported revenue of $6.01 million for the second quarter, which is a decline from the $7.13 million reported in the second quarter a year ago. The continued decline in revenue was attributed by SCO to competitive pressures against Unix.

But McBride cited a number of wins in the quarter, including sales to CVS Pharmacy, Walgreens and McDonalds in the U.S. He also touted a new graphical interface, announced in April, for SCO's Unix offerings.

"SCO's Unix users use a green screen, but many may have tried to migrate to Windows and found it difficult to move," McBride said on the conference call. "Converting makes it easier without the need to move to a different platform."

The new Unix terminal graphical overlay comes to SCO via software vendor April System Design and its AniTa Telnet Terminal Emulator. AniTa, according to SCO, makes a Unix text-based application look like a Windows application by creating 3-D box attributes and enabling Windows applications to interface with Unix applications.

"That's been a nice pick up for us this quarter," McBride said.

SCO being SCO, litigation is always a topic of discussion.

SCO is currently engaged in legal battles with both Novell and IBM on issues related to ownership of the Unix copyright and alleged infringement of SCO's intellectual property by Linux.

McBride said on the call that the SCO versus Novell trial is set for Nov. 17 and that they are hoping to have the scheduling soon for its case against IBM. McBride also noted that he felt good about how SCO has come through the process so far and that SCO has filed several motions recently.

McBride himself actually gave a deposition, in which he revealed how much SCO expected to make from its SCOsource license, which offers IP protection to Linux users. McBride did not discuss the deposition on the conference call, but rather was brought to light in a legal filing publicly posted on the anti-SCO Groklaw Web site.

"It's a ridiculously big number," McBride said in the court deposition. "So okay. I guess we could get finite on whether the number is $5 billion or $1 billion or $6 billion. The point is it was a lot of money for the company, and the size of company that we were."

For the second quarter of 2007, SCO reported a total of zero dollars of revenue from its SCOsource licensing program. In the first quarter of 2007, SCO reported SCOsource licensing revenue of $34,000, which is somewhat less than the billions McBride had been expecting.

SCO did not respond to repeated request for comment.