SCO Defiant Amid Financial Losses

As it battles on to claim copyright infringement in select parts of the Linux kernel, Lindon, Utah-based SCO Group reported second quarter revenues that were about 52 percent lower than the same time last year.

The company said its net loss for the quarter was $15 million ($1.06 a share) in its fiscal second quarter, on revenues of $10 million. During the same time last year, SCO’s profit was $4.5 million (33 cents per share) on revenues of $21.4 million.

However, SCO continued to report a strong cash position with a balance of over $61 million as of April 30.

The company attributed its lackluster quarterly performance to a number of factors, namely the lack or revenue from its SCOsource licensing program, which aims to have Linux users pay SCO for Linux licenses. During last year’s second quarter, SCO reported $8.25 million in revenue from its licensing program. This year, it pulled in $11,000 for the quarter.

During a conference call Thursday, SCO CEO Darl McBride and other company executives took aim at Novell and IBM, the companies it has sued over copyright disputes involving Linux, as well as Linux creator Linus Torvalds, while outlining plans for growth alongside its battle.

It’s a fight that looks likely to continue for longer than thought. SCO is also looking to delay its lawsuit against IBM over Linux from April of next year until September, according to recent court motions.

McBride said the company is fighting back on all fronts, and noted a number of wins for SCO’s UNIXware and OpenServer product, including CVS Pharmacy, McDonalds, Thompson Financial, WebMD, Lucent, BMW, Toshiba, and the U.K.’s Department of Navy among others.

SCO is also active on the UNIX product development front. “In fact our upcoming releases mark the largest across the board group of
significant product enhancements from SCO in the last several years,”
he said.

New products from SCO include UNIXware 7.1.4, which begins shipping this month, a small footprint embedded UNIX product and SCO Office Server 4.1, due out next month. In August it plans to release single sign on user ID tool Vintella, and in the first quarter of 2005 the company expects to deploy its OpenServer Legend platform, designed to bridge the gap between UNIXware and OpenServer.

McBride addressed the fierce backlash that SCO has felt against its
SCOsource licensing program. “We understand that many people out there have complained about this program,” McBride said. “We want to provide a sound fair business solution that allows companies to continue to run their businesses knowing that they are not violating our IP rights.”

McBride also went on the verbal offensive against Novell , with whom the company is engaged in litigation over copyrights that were sold in 1995.

“Let’s be clear, we did not cause this problem,” McBride said. “We believe that the problem was caused by others who have violated our contractual and ownership rights.”

McBride also took aim at Linux creator Linus Torvalds’ recent certificate of origin initiative, an effort to track contributions and contributors and make sure contributors are given their due credit for their work.

McBride called it proof that supported SCO’s claim about copyright infringement in some parts of the Linux kernel.

“It validates the concerns and problems we have expressed over the past year about the Linux development process that has been fraught with opportunities for illegal contributions of code with minimal checks and balances,” McBride said. “We believe it is in part because of this
unchecked process that SCO code has improperly made its way into Linux.”

Despite the losses in the current fiscal quarter, McBride and his CFO declared that SCO has the financial wherewithal to continue to invest between 3 and 5 million dollars per quarter in its legal efforts. “We’ll have enough cash to get to our destination,” McBride said.