SCO Group’s Quarter Losses More Than Double

By Bob Mims, The Salt Lake Tribune

Jun. 9–The SCO Group’s net losses for its most recent quarter more than doubled, largely because of nearly $3.8 million in new expenses related to its lawsuit against IBM.

The Lindon-based software company, which is seeking $5 billion from Big Blue for allegedly misappropriating SCO’s Unix code for use in the freely distributed Linux operating system, lost $4.69 million, or 22 cents per diluted share, for the quarter ending April 30. For second quarter of 2005, SCO lost $1.96 million, or 11 cents per share.

SCO, also embroiled in Linux-related, federal suits involving Novell, Red Hat and AutoZone, further endured a precipitous slide in receipts. The company recorded $7.12 million in revenue for the quarter, down 23 percent from the $9.25 million reported this time last year.

During a teleconference call, SCO President and CEO Darl McBride were questioned about the $3.7 million expense for the IBM case — a development some shareholders did not expect, believing a cap had been placed on the company’s bills with litigator Boies, Schiller & Flexner.

McBride and other SCO executives explained the expenses were outside the cap, linked to the company’s agreement earlier this week to replenish the lawsuit’s $5 million escrow account. That money will be used to cover the cost of hiring future expert witnesses and consultants.

McBride lamented that he could not rule out these future expenses, given the “unique and unpredictable nature” of the IBM case. “But we do feel we are nearing the home stretch in this process and remain confident in our legal team. We look forward to the conclusion of litigation.”

The trial in the IBM case, now in its fourth year, is expected to begin in February of 2007.

McBride boasted about the market potential for several new products, among them SCO’s EdgeClick mobile development platform, Me Inc. mobile services and its MySQL database and OpenServer lines.

“Despite our revenue decline and net loss, we remain committed to and optimistic about our business strategy,” he said.

Still, McBride acknowledged real earnings progress might not occur until after a successful conclusion to the IBM case. “Unlocking the value of our core Unix business will be difficult until we resolve the issues raised by our intellectual property litigation,” he said.

SCO stock closed Thursday at $4.52 per share, unchanged from Wednesday’s trading.

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