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| SCO Posts Loss, Revenue Down -- What Else is New? |
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Wednesday, April 13 2005 @ 05:00 PM EDT
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SCO's first quarter financials are available now. It's losses expanded and its revenue fell. Its stock remained steady on the news:
The Lindon, Utah, company posted a net loss of $2.96 million, or 17 cents a share, in the fiscal first quarter ended Jan. 31, compared with a loss of $2.49 million, or 18 cents a share, a year earlier.
Revenue fell 22 percent to $8.9 million from $11.4 million. . . .
SCO said revenue declined in the latest fiscal quarter because of a drop in licensing revenue on lower product and licensing sales.
Darl McBride, SCO's president and chief executive, said that the company was "steadfastly focused on winning in both the court room and in the market place." Steadfastly focused is an accurate description. But maybe they need to look over the bow and notice they are sinking into the Big Blue sea.
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| Authored by: gnuadam on Wednesday, April 13 2005 @ 05:12 PM EDT |
| Anybody know of a place where they're liveblogging the conference call? [ Reply to This | # ]
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| Authored by: reuben on Wednesday, April 13 2005 @ 05:24 PM EDT |
Please post any corrections here.
To start things off: it's -> its in the first line.[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 05:25 PM EDT |
for a quarter whose statement hasn't been filed yet?
sum.zero[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 05:30 PM EDT |
| Does this report bring them back into reporting complience? [ Reply to This | # ]
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- No - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:07 PM EDT
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| Authored by: tiger99 on Wednesday, April 13 2005 @ 05:38 PM EDT |
And please remember to make links like this:
<a href="http://www.somewhere.com/somepage.html">Click
me</a>, and of course post that in HTML mode. Helps to keep Groklaw tidy
and efficient, thanks.[ Reply to This | # ]
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| Authored by: tiger99 on Wednesday, April 13 2005 @ 05:40 PM EDT |
| I expect that PJ is getting the famous red dress ready right now. At least a
preliminary airing..... :-) [ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 05:43 PM EDT |
What this seems to imply is that the stock price is not based on Unix
revenue/losses. Or that the declining unix business is already factored in.
Therefor the price would seem to be supported by other assets or "potential
income".
Or in short: duh.[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 05:46 PM EDT |
Oh oh,, According to SCO, Pam isn't who she says she is.... and SCO knows
something about the identity of whose really behind Groklaw...
Pam,, was there a sex change in your past?[ Reply to This | # ]
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| Authored by: tiger99 on Wednesday, April 13 2005 @ 05:47 PM EDT |
Just managed to access the conference call. Don't know who was speaking, doesn't
sound exactly like Darl, but he is making an issue about the identity of PJ, and
the integrity of Groklaw. Sounds like desparation![ Reply to This | # ]
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- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 05:49 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: haphazard on Wednesday, April 13 2005 @ 05:51 PM EDT
- PJ Wookie - Authored by: stingbot on Wednesday, April 13 2005 @ 05:53 PM EDT
- PJ Wookie - Authored by: Anonymous on Wednesday, April 13 2005 @ 10:36 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 05:57 PM EDT
- Not to worry... Darl will share "once he has all his facts in order" n/t - Authored by: Anonymous on Wednesday, April 13 2005 @ 05:59 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 05:59 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 05:59 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:00 PM EDT
- Attack on PJ.... - Authored by: rsteinmetz70112 on Wednesday, April 13 2005 @ 06:01 PM EDT
- Attempt to use Compuware to smear IBM too - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:03 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:03 PM EDT
- Way to go, PJ! - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:12 PM EDT
- Way to go, PJ! - Authored by: Anonymous on Wednesday, April 13 2005 @ 06:20 PM EDT
- Attack on PJ.... SCOundrel getting desparate! - Authored by: producer on Wednesday, April 13 2005 @ 08:24 PM EDT
- It doesn't matter who PJ is. - Authored by: kawabago on Wednesday, April 13 2005 @ 10:27 PM EDT
- Remake of the Howard Hughes - Clifford Irving Affair - Authored by: David Dudek on Thursday, April 14 2005 @ 02:35 AM EDT
- Maybe it goes like this - Authored by: Anonymous on Thursday, April 14 2005 @ 01:42 PM EDT
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| Authored by: Saturn on Wednesday, April 13 2005 @ 06:01 PM EDT |
...and can't be trusted (as they claim) why are they copying/using her work
verbatim on their web site?
I think the decision not to take action against SCO for copyright violations
just paid off big time.
---
----------------------------------------
My own opinion, and very humble one too.
Which is probably why I'm not a lawyer.[ Reply to This | # ]
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| Authored by: blacklight on Wednesday, April 13 2005 @ 06:03 PM EDT |
"Darl McBride, SCO's president and chief executive, said that the company
was "steadfastly focused on winning in both the court room and in the
market place.""
... And the results speak for themselves.[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 06:35 PM EDT |
Haven't they had significant custbacks? And now they say losses widened?
This would seem to be an acceleration of their decline.[ Reply to This | # ]
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| Authored by: jbf on Wednesday, April 13 2005 @ 06:37 PM EDT |
so those of us who didn't call in can listen or transcribe it or something?[ Reply to This | # ]
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| Authored by: rsteinmetz70112 on Wednesday, April 13 2005 @ 07:14 PM EDT |
I noticed that they were asked about the DCC documents missing from their web
site and side stepped it completely.
O'Gara asked a question as well.
---
Rsteinmetz
"I could be wrong now, but I don't think so."
Randy Newman - The Title Theme from Monk[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 07:42 PM EDT |
For those financial types:
Any idea with this latest info what the burn rate is and the TTTB (Total Time To
Bankrupcy)?
[ Reply to This | # ]
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| Authored by: Anonymous on Wednesday, April 13 2005 @ 07:43 PM EDT |
The question is:
Is MOG really Super-Darl, or is Darl really Super-MOG.
[ Reply to This | # ]
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| Authored by: droth on Wednesday, April 13 2005 @ 07:56 PM EDT |
I can't believe they actually put this in their press release:
SCO
wishes to advise readers that a number of important factors could cause actual
results to differ materially from those anticipated in such forward-looking
statements including factors such as continued competitive pressure on its
operating system products which could impact the profitability of the UNIX
business, unforeseen legal costs related to the Company's intellectual property
litigation, the Company's inability to develop new products and services, the
Company's inability to release SCO OpenServer 6 in the first half of calendar
year 2005, the Company's inability to see its intellectual property litigation
through to its conclusion, the Company's inability to complete the necessary
procedures to file its Form 10-Q for the quarter ended January 31, 2005 by April
15, 2005, and the possible determination by the Nasdaq Qualifications Listing
Panel not to grant the Company's request for continued listing on The Nasdaq
SmallCap Market, among others.
Translation:
"Um...
we're screwed."
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| Authored by: Anonymous on Thursday, April 14 2005 @ 12:37 AM EDT |
My understanding is that they had 7M in unrestricted cash at the end of oct
2004. That reflected all the money they were in pay for legal fees they were to
pat BSF, which was already restricted cash.
After losing 3M, they now have 9M in unrestricted cash.
How?
I noticed their restricted cash decreased, did some restricted cash become
unrestricted?
Will we need to wait for the real quarterly filing to find out?
Dennis
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| Authored by: Anonymous on Thursday, April 14 2005 @ 02:11 AM EDT |
I listened to the conference call, here are my notes:
There is a link to it from their web site
Decatur Jones (someone standing in for Deion) said that legal costs were down,
but higher than DJ had expected, ask what the future holds.
Answer was that legal fees were in three parts. 1) The 2M a quarter paid to BSF.
2) BSF expenses not covered by the agreement. 3) Internal SCO expenses related
to the suit.
Parts 1&2 were higher than expected Q1, but with discovery on hold in “The”
case, it should be much lower in Q2.
I could not get the exact numbers, but in Q1, 4 M was paid for the Q4 and Q1
fixed fees, and about 1M was paid for expenses not covered by the agreement.
They will have their filing in by Friday, and then they will be in full
compliance. They say that NASDAQ could still delist them, but they expect the E
will be gone sometime next week.
McBride says PJ is not who she seems. Bob Mims of the SLT pressed him, but he
gave no details. Says when they finish their investigation, they will go public
with it.
Note to PJ, why not contact Bob and prove to him who you are. He can publish
that he knows you are who you claim, without having to give up names or
sources.
MOG ask if she was correct in thinking SCOSource generated 0 dollars in Q1, she
was corrected that it generated 70K. Some of that was from payments on
previously sold licenses, and some was from new licensees.
When asked about open source Solaris, McBride said talks were ongoing with Sun
over that. Would not say if talks were between lawyers or execs. Said Sun did a
better job of following their requirements than any other licensee.
SCOForum will be at the Vegas MGM in August.
They have 7.4M in unrestricted cash. (maybe the 9.4M in the press release –
another 2Q 2M payment, or that may have been 7.4 at the start of Q2)
They have 4.8M left in escrow for legal expenses not covered by the agreement.
Dennis
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| Authored by: bstone on Thursday, April 14 2005 @ 02:46 AM EDT |
Now we know why they keep issuing more shares. The loss per share goes down if
you print up lots more of them.[ Reply to This | # ]
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| Authored by: artp on Thursday, April 14 2005 @ 08:38 AM EDT |
"SCO said revenue declined in the latest fiscal quarter because of a drop
in licensing revenue on lower product and licensing sales."
I'm sorry. I'm just an engineer. What do I know about high finance. Revenue
declined because revenue declined?
I'm surprised nobody else jumped on this. Maybe my wife is right about my sense
of humor???[ Reply to This | # ]
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| Authored by: jbf on Thursday, April 14 2005 @ 11:11 AM EDT |
time: 0.00 - 2:15
oper: good day everyone and welcome to the SCO group 1st Q 2005 earnings
conference call. today's
call is being recorded, at this time for opening remarks to this discussion, i
would like to turn
the conference over to mr blake stowell, PR director. mr stowell, please go
ahead.
S: thanks, good day everyone, and thanks for joining us on today's call. at
this time everyone is
in listen only mode. later a Q&A session will be opened. during that
Q&A session, the company will
only be providing a general update on the status of our pending litigation, and
cannot address
evidence, rulings, strategies, or other specific details. today's call is being
recorded.
participating on the call today, are darl mcbride, president and CEO, and bert
young, CFO. each of
you should have received a copy of the press release issued this afternoon
containing our results,
which we'll be discussing further in this call. i wish to point out to the
participants on today's
conference call that the information provided during this call will include
forward-looking
statements within the meaning of the private securities litigation reform act of
1995. these
forward-looking statements are made only as of the date of this conference call,
and we undertake no
obligations to update or revise the forward-looking information, whether as a
result of new
information, future developments, or otherwise. our performance is subject to
significant risk and
uncertainties, known and unknown, that could cause our actual results to differ
materially from
those that may be anticipated by the forward looking statements. these risks
and uncertainties may
cause our actual results, level of activitity, performance, or achievements to
be materially
different from any projections or future results implied by these forward
looking statements.
accordingly, you should not place undue reliance on these forward looking
statements. for a full
discussion of these and other risks and uncertainties, please see our annual
report on form 10-k for
the FY ended oct 31 2004, and other reports we have filed with SEC, all
available at www.sco.com. i
will now turn the call over to darl mcbride, president and CEO of the SCO
group.
[ Reply to This | # ]
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| Authored by: jbf on Thursday, April 14 2005 @ 08:10 PM EDT |
time: 0.00 - 2:15
oper: good day everyone and welcome to the SCO group 1st Q 2005 earnings
conference call. today's call is being recorded, at this time for opening
remarks to this discussion, i would like to turn the conference over to mr blake
stowell, PR director. mr stowell, please go ahead.
S: thanks, good day everyone, and thanks for joining us on today's call. at
this time everyone is in listen only mode. later a Q&A session will be
opened. during that Q&A session, the company will only be providing a
general update on the status of our pending litigation, and cannot address
evidence, rulings, strategies, or other specific details. today's call is being
recorded. participating on the call today, are darl mcbride, president and CEO,
and bert young, CFO. each of you should have received a copy of the press
release issued this afternoon containing our results, which we'll be discussing
further in this call. i wish to point out to the participants on today's
conference call that the information provided during this call will include
forward-looking statements within the meaning of the private securities
litigation reform act of 1995. these forward-looking statements are made only
as of the date of this conference call, and we undertake no obligations to
update or revise the forward-looking information, whether as a result of new
information, future developments, or otherwise. our performance is subject to
significant risk and uncertainties, known and unknown, that could cause our
actual results to differ materially from those that may be anticipated by the
forward looking statements. these risks and uncertainties may cause our actual
results, level of activitity, performance, or achievements to be materially
different from any projections or future results implied by these forward
looking statements. accordingly, you should not place undue reliance on these
forward looking statements. for a full discussion of these and other risks and
uncertainties, please see our annual report on form 10-k for the FY ended oct 31
2004, and other reports we have filed with SEC, all available at www.sco.com. i
will now turn the call over to darl mcbride, president and CEO of the SCO
group.
time: 2:15 - 3:40
DmcB: ok, thanks blake, and thanks everyone for joining us on today's call.
well, as always, an active quarter in the media for SCO, and one not without its
bumps in the road. but, through all of the noise, we have remained focused on
the business. to that end, we are pleased to note that as expected, our core
unix business is generating meaningful cash flow, a trend we believe will
continue throughout Fiscal 2005. at the same time, our legal costs remain in
line with our expectations as announced last quarter. the result is, as we said
at year end, the combination of the operating results in our unix business and
the cap on the costs of litigation will ensure we can remain steadfastly ofcused
on driving success in both the marketplace and in the courtroom, and demonstrate
our focus on taking whatever steps are necessary to ensure success in both
areas. with that, as we move forward with our litigation, we are focused on our
continuing to develop new products and services for the unix platform to the
benefit of our customers. i'll speak more specifically o nthis later, but the
introduction of our next-generation unix platform, sco openserver 6, codenamed
legend, is a perfect example of those efforts. i will now turn the call over to
bert young, our CFO for an overview of the companies financial results. bert?
time 3:40 - 7:30
by: thanks darl. the company reported revenue of 8.9 million for the 1st Q of
FY 2005. as compared to revenue of 11.4 million for the comparable Q of the
prior year. the net loss for the 1st Q was 3M dollars or 17 cents per diluted
common share, compared to a net loss of 2.5M or 18 cents per common share
reported in the comparable Q of the prior year. revenue for the unix business
was 8.8M. unix revenue was down year-over-year and sequentially, primarily as a
result of continued competitive pressure for Operating Systems. revenue derived
from SCOsource licensing for the Q was 70,000$, which represents a
year-over-year increase from the 1st Q of 2004. as we have stated in prior
quarters, we have cautioned that predicting this revenue stream is very
challenging and will continue to be difficult to predict. cash and cash
equivalents in available for-sale securities were just over 20M$ at jan 31 2005.
of which, approx 4.8M$ remain in an escrow account for certain expenses
associated with our IP litigation. i will talk in more detail about the
companies cash in a few minutes. for the 1st Q of 2005, the cost of revenue of
the unix business was 1.4M, resulting in gross margin of 7.4M or 84%. cost and
expenses of the unix business were 7M$, and have trended downward as we
expected. we anticipate the cost of the unix business will stay at the current
run rate going forward. as a mgmt team, we're pleased iwth the progress we've
made with the unix business, despite a challenging and very competitive
operating environment. as in previous Q's, we are continuing to classify legal
and professional fees and other costs and expenses that relate directly to the
enforcement of our IP rights as cost-of-revenue. for the 1st Q of FY 2005,
these costs were 3.5M$, which was down from the prior Q as a result of our
revised fee arrangement with Bois schiller & flexner. as we told you on
last quarters call, we have received $500,000 from vintella for a note
receivable which they owed us, which we recorded in our 1st Q as "other
income". now switching gears, let me address the issues relating to the
filing of our form 10k and our nasdaq listing. as you know, we've identified
certain equity matters that required us to restate our 2004 quartery financial
statements and related footnotes. rather than repeat the detail again which
you're all aware of, i remind you to review our amended form 10q which we filed
with the SEC 2 weeks ago. one thing i'd like to point out is that the
restatement did not impact the companies previously reported revenue, net loss,
or its earnings per share for the FY ended Oct 31 2004. equally important, it
did not impact our cash and a vailable for securities balances either. as a
result of the restatement, we've implemented in our internal control procedures
additional detailed transaction of controls, an equity compliance checklist, and
additional review and approval procedures to ensure these errors are not
repeated. while this certainly caused significant angst for the company and its
shareholders, we're committed to total transparency in our financial reporting,
and ultimately are glad we caught these issues and corrected them appropriatey
which we think is in the best interests of all our shareholders.
time 7:30 - 12:42
BY: now, there are some residual issues from that, so let me address those.
first, the nasdaq listing. as you may be aware, the chain reaction of our
needing to restate and the need for more time to f ile our 10k resulting in our
failure to comply with nasdaq's continued listing requirement. we subsequntly
received a notice that we were being considered for delisting, and then nasdaq
added an E to our ticker symbol. we were then granted a hearing with the nasdaq
listing qualifications panel. we participated in the hearing with the nasdaq
listing qualifications panel on march 17, and addressed the reasons for the
delay with both our form 10k and form 10q for the 1st Q of FY 2005 and our
anticipated plan to get these filings made. on april 1, we filed our form 10k,
and anticipate filing our form 10q for the 1st Q by this friday, apr 15, 2005.
we believe that with the filing of our 10k for 2004 completed and once our 10q
for the 1st Q is filed, that we will satisfy the continued listing requirements
for nasdaq, and the E will be removed from our ticker symbol. however, while
the company is awaiting the decision from the panel, we continue to be listed on
the nasdaq small cap market on the symbol SCOXE. i'd take a minute to break
down our cash position so that everyone on the call can understand this in more
detail. as you'll recall, as we announced our agreement with our lawyers last
year, expenses for the litigation are capped at approximately 31M$, which
included 5M$ for escrow and expert and other costs, leaving 26M$ in fees due to
the legal team. the 26M$ in fees was broken into two buckets, 14M$ in payments
we owed for services rended, of which 1.7M$ was paid in Q4. the rest, or
12.3M$, has been approved for on the balance sheet. the second bucket includes
(6) 2M$ quarterly payments we would make in each of the next 6 Q's for 12M$.
now, in Q1, we paid 16.3M$ in fees under this arrangement, made up of the 12.3M$
accrued from the first bucket and two quarterly payments of 2M$ each for Q4 and
Q1. we ended Q4 with a little over 36M in cash, less the 16M$ in payments,
equals 20M in cash at the end of Q1. so, going forward, if you subtract 8M$, or
four more 2M$ quarterly payments, to be paid from the ending cash of 20M$, that
would leave approximately 12M$ of which 4.8M$ is reserved for escrow, leaving
over 7.4M$ to operate the business going forward or to pay additional expert
fees as required. so, in summary, let me emphasize that at the end of Q1 we had
over 20M in cash, and 7.4M$ is free and clear of any obligation and can be used
at our discretion. in addition, with the unix business generating cash, we
believe we are in a solid position to operate our core business and see the
litigation through to its conclusion. before i hand it back over to darl, i'd
like to quickly note a recent transaction we closed. please note that this
transaction actually occured in our 2nd Q, and as such will be accounted for in
our Q2 income statement, but it is important so i'll jsut review it quickly. in
dec 1999, SCO entered into an agreement with TrollTech AS to acquire shares in
trolltech. during the FY 2001, SCO mgmt determined that the pairing value of
the investment in trolltech would most likely not be recoverable, and the
investment was written down to zero. however, last month we received notice
from trolltech that a third party investor was interested in acquiring our
shares. on mar 14, we sold our shares for proceeds of 779,100$. the company
will account for the sale and the proceeds of the trolltech shares in its 2nd Q,
numbers consistent with when we received the proceeds. since all amounts
related to the book value of the shares have been written off during FY 2001, we
expect to report the proceeds as a component of other income in our Q2 statement
of operations. with that, i'll hand things back to you darl.
time 12:42 - 15:46
DmcB: thanks bert. i'd like to spend the remainder of the call addressing our
business performance nad prospects. we were pleased at the performance of our
unix business and that businessi s focused on generating positive cash flow
despite a challenging business environment. the company generated sales through
products and professional services with the following customers worldwide
including, carafore (?), UK ministry of defense, UCO bank in india, marcony UK
which is a division of BT, AFC online in germany, seimens ITN also in germany,
thomson financials, CVS pharmacies, nasdaq, mcDonalds, people's bank in china,
the china post, korea's ministry of defense, and unisys in japan. the company
continues to receive great feedback from numerous produt beta testers of the
pre-release version of our openserver 6 product. in some cases, the product is
seeing double the performance in product benchmarks compared to the previous
versions of sco open server. upon its release, sco open server 6 will support
thousands of applications, including thousands of unixware and sco openserver,
java applications, and other applications that r un on mysql, postgresql,
tomcat, apache, and many other popular applications. the company will also
continue to include backward compat for apps that have run on previous versions
of sco openserver. our resellers are telling us that they anticipate a lot
interest in their customer base in this release of openserver. the company will
host a significant product launch event in NYC, its going to happen over a
couple of days, a key part of the launch event that willl be interesting is
going to happen at yankee stadium, where we will launch openserver 6. this will
happen in june, we anticipate that its going to be well attended by sco software
and hardware partners, many of sco's key customers, as well as several members
of the media and analyst community. this is a multimillion dollar multiyear
development effort, and is the most significant product release from this
company in the last several years. during the past year, we have put the
majority of our development, marketing and sales efforts behind sco openserver
6, and we hope to see many positive returns come as a result. given the current
status of ... in addition to our june launch event for sco openserver, we have
scheduled our annual sco forum event in august, that will be the 7-9, in the MGM
grand hotel in las vegas. the sco forum has been well attended and seen
signficant interest in recent years. we look forward to another great gathering
this year for our resellers and software and hardware partners. now, let me go
to where i was going to tlak, the litigation update.
time 15:46 - 20:48
DmcB: as stated earlier, we're not able to offer specifics on many of the
aspects of our litigation matters. we will however note that we remain
confident that the merits of our cases, and the next few months promise to be
telling as key events in the various matters unfold. we are also pleased to
note that we have launched a SCO IP web site at sco.com/scoip. those interested
in our litigation efforts can access the site for information on filings and
upcoming hearings. you won't find any spin on this site, but rather just the
facts. since the website launch about 20 days ago, it has been very well
visited, and we plan to continue keeping the site updated on a regular basis for
those who would like to follow our litigation more closely. we believe we made
important progress in the IBM case by obtaining critical rulings from both the
US magistrate judge and the US district court judge. in jan, the mag judge
issued an order requiring IBM to provide us with information including code and
revision information that we have long believed we are entitled to under the
rules of discovery and that we believe will be important in preparing our case
for trial. some of that information has recently been delivered to us, and more
will come in over the next couple of weeks. we are ready and eager to begin the
analysis of that inforamtion. the mag judge also cancelled the scheduling order
in the case, and directed the parties to propose a new schedule. the parties
have now submitted proposed schedules, and we anticipate that the court will set
a new schedule for the case in the near future. our proposed schedule sets out
a reasonable timeline for the parties to complete discovery and proceed to a
jury trial next summary. in early feb, the US district court judge issued an
order that among other things granted our request to deny IBM several motions
for summary judgement as premature. under that order, the court also directed
the parties not to file any additional such motions until after discovery in the
case has been completed. these rulings place the case on a more reasonable and
standard trajectory, and have provided us with a framework to move this case to
a successful conclusion. a hearing on our motion to file an amended complaint
to assert an additional copyright claim regarding IBM's AIX product is currently
scheduled for Apr 21. given the current status of discovery and other factors,
including our intent to file additional amendments, we have requested that the
hearing be delayed until we have an opportunity to bring these other matters
before the court. the court has not yet ruled on our request. several
entitites in the press have asked the court to unseal certain documents, that
have been designated as confidential by the parties, and that motion is set for
a hearing on apr 26. there seems to be significant interest in that motion.
otherwise in the IBM case, we will continue to analyze the evidence that we have
received thus far, and the evidence that IBM will soon produce under court
order, and we will continue to prepare to present our case to a jury next year.
in the novell case, a hearing on novell's 2nd attempt to have the case dismissed
is scheduled on may 25, and we believe our position for a denial of this 2nd
motion is strong. by mutual consent of the parties, the discovery period in the
autozone case has been extended to may 9, 2005, and we will be reporting to the
court sometime after that. we do believe that we made significant progress with
our litigation efforts, and continue to work toward the day when we will present
our claims and evidence to a jury. as a final note, as you may be aware the
canopy group and our chairman ralph yarro, as well as one of our directors darcy
mott, announced a settlement agreement by which mr yarro received canopy's 5.4M
SCO shares for approximately 30% ownership interest in SCO. as a result, we
expect that mr. yarro will remain chairman of our board of directors and that
mr. mott will remain a director. our comapnies board of directors will be voted
on at the comapnies annual shareholder meeting which we expect to announce in
the near future. we are pleased byu this result as both mr yarro and mr mott
have been ardent supporters of our current strategy. we look forward to ralph's
continued input as both our chairman and major shareholder, and darcy's
contributions as a director. we believe that they both have, hold, a long-term
of the shareholder value in our company which we believe will be beneficial to
SCO. with that, i'll now turn the call over the operator to open up the phone
lines for questions.
time 20:48 - 21:20
oper: the Q+A session will be conducted electronically. if you would like to
ask a question, please do so by pressing the * key followed by the digit 1 on
your touchtone telephone. if you are using a speaker phone, please be sure that
your mute button is turned off to allow your signal to reach our equipment. we
will proceed in the order that you signal us, and we will take as many questions
as time permits. once again, please press *1 to ask a question, and we'll pause
for am oment to assemble our roster.
time 21:20 - 23:48
oper: we'll have our 1st question from steven von nichols, sr editor of
eweek.com.
st: hi folks
dmcB: hi steven
st: sun continues to say that they are going to be open souricng solaris,
probably around june now at the latest guesstimate i'm getting from them, and
that this wouldn't be not just the drivers but the large chunk of the actual OS
kernel. we've spoken about this before, and your representative has always
assured me that while sun has the broadest IP rights of anyone over the unix
kernel, they do not have the right to actually open source the kernel. have t
here been any further discussions with sun about this matter, or any more news
to report in this venue?
db: we believe we have a pretty good idea of sun is trying to do, i don't want
to speak ahead of what they actually do in june, but after reviewing what their
plans are and given what our agreements with them are, we feel comfortable with
the direction they are going, and we believe that after their announcement is in
the marketplace and the dust is settled, it will be more clear for all of us to
see what they are doing, and i believe that what they are doing will be well
within their rights they have with our agreements, and its something that we'll
still be very protective of the rights we have in the unix operating system.
so, again, i don't want to get into the details of what that means, let's wait
until they come out with it, but we have had some insights there. from our
perspective, sun has been a great licensee for a long time, with us or our
predecessors in interest, and if all our licensees had towed the line the way
sun has with their agreement, i don;t think we'd be having some of hte issues
we're having the courtrooms today.
st: if i could have a followup on that, were these discussions between SCO and
SUN attorneys or at the executive level between yourself and mcnealy or othe
people at sun?
db: i'd rather not comment on the exact nature of the discussion steven, but
suffice it to say that it's a level we have a good understanding of what each
other is doing.
st: thank you very much
db: yep
time: 23:48 - 28:40
oper: we'll have our next question from deon cornett, decatur jones
db: hey deon
jg: good afternoon, this is james gillman for deon cornett, can you hear me
okay?
db: sure
jg: i want to congratulate you on getting your operating expenses in line with
the business
db: thank you
jg: you're welcome. we do have a projected legal expenses.. while they were
lower sequentially, they were a little bit higher than our expectations. do you
expect these costs to be fixed flat here or do you expect them to go up?
by: good question, let me answer that, this is bert. the scoscource cost are
made up of three general areas, so let me that and then i'll answer the
question. the first one of course is the 2M$ per quarter legal payments that we
will ocntinue to make to our lawyers for the next few quarters. then we have
other expenses that are paid out of this escrow account for experts and other
type expenses to support the lawsuit, and then we have some additional costsi
nternally here at sco for the folks that support he lawsuit and owrk on it. so
to answer the question, our thought, my thought, would be that in Q2 you'll
probably see other expenses a little bit lower than in Q1, and as you know in Q2
the rulings from the judge pretty much stopped discovery in the case so i think
expneses will come back down a little bit in Q2, but the other costs will
continue to be in line. we'll continue to have 2M$ a quarter for the next few
quarters, and our internal costs are pretty standard every quarter.
jg: ok, i have several other questions - this goes in reference to your k you
recently filed - you mention in there that there could be additional legal fees,
could you be a little more specific on that, are these associated with this
particular litigation, or.. and also in the k, you mentioned that there are
other proceedings with the scoscource initiative... are those beyond what are
listed in the k and the web site?
by: no, well, so i'm not quite sure of the question. we don't have any
additional litigation that we haven't talked to anybody about, if that's the
question..
jg: correct, so you mention in the k and web site the companies, but you do not
have anything in addition to hose proceedings...
by: no, no we don't
jg: the other question would be - what is the fully diluted share count
including all authorized and issues options? we were expecting a little bit
higher share count, but maybe with the share price, that share count is lower?
by: so let me see if i understand the question. the fully diluted share count
we issued in the release was 17.7M shares, and if you wanted a fully diluated
number it would be an additional 3.8M shares.
jg: ok, great. one last question, i know other people have questions, what
conditions may nasdaq impose upon you to remain listed?
by: well, there's a number of requirements to maintain a listing on any of the
stock exchanges, we meet all of those requirements except we did not file our
10k on time, and consequently we didn't file the Q on time. that is the
requirement that we have run afoul of, and that we're trying to fix, and so our
anticipation -- and i think the panel understood why we didn't meet those filing
deadlines and understood what we're doing to get it fixed -- and we anticipate
that as soon as we're current on our filings, that nasdaq will review that, see
that the filing is appropriate, and we would hope that they will remove the E
within am atter of days.
jg: so we're looking at sometime next week then?
by: that's what we're hoping, yes, clearly what's in our hands is to make the
filing, what's out of our hands is what nasdaq does. but our view is that as
they see we've met all the requirement,s there's no reason for them to not find
us in compliane and remove the E.
jg: i do thank you for answering my questions.
by: you bet.
open: just a reminder to our audience, it is *1 if you would like to ask a
question.
time: 28:40 - 31:03
oper: we'll go next ot herb jackson, renaissance pictures
hj: gentleman, greetings
db: herb, how ya doing today?
hj: doing great. i noticed the compuware case settled late last month. do you
have any comments or observations on that?
db: yeah, interesting question. we did follow the compuware case, for those of
you not aware of it, there was a case between compuware and IBM, in fact our
general counsel attended much of the trial. obviously the underlying facts in
the two cases are somewhat different, but like our case, compuware has asserted
some torte claims that basically IBM had misappropriated it's IP and proprietary
information and then used that information to compete against it in the
marketplace. compuware actually received a very favorable settlement after
approximately 5 weeks of trial, but before the jury could actually decide on
IBM's alleged conduct. a couple of other interesting points on the compuware
case are worth nothing. first, as in oru case, IBM aserted patent infringement
cases against compuware. we see this as a strategy IBM has employed to prolong
and complicate cases liek this one in order to make them unduly expensive. it's
also interesting to contrast that behavior with IBM's recent public claims,
including those from their VP over IP, jim stallings, and said the US patent
system needs to be overhauled of patent misuse. second, it's also worth noting
that IBM was sanctioned in the compuware courtroom for discovery misconduct
before the compuware trial actually began. i guess to summarize in short, we
learned a great deal from the compuware trial experience, and we expect to bring
some of that understanding to bear in our particular case.
hj: thanks, that's great.
db: yep.
time: 31:03 - 36:20
oper: we'll have our next question from al patrosky with a private investor
db: how are ya doing al?
al: good, thanks, how are you doing?
db: good
al: i'm looking at the press release from a year ago about naming wolf bower as
VP eng and scott lemes and CTO, now i understand those are both gone now?
db: that's correct
al: i don't remember an announcement of them being fired, do you someone running
eng and your technology?
db: yeah, we have back in NJ in our old AT*T offices and across the street from
lucent, in muriel NJ where we have the core of our eng staff, sandy gupta who is
running the group there -- sandy is extremely qualified, a great technologist,
and at the same time to integrate technology is a very good leader, very
dynamic, and under his leadership we have been able to move legend from where it
was a year ago through the process and get it to beta and now soon it's ready to
release, so we're very happy with the leadership that sandy has been stepping up
and providing for us there
al: so what title does he have now?
db: he's VP of eng
al: so CTO is a title you're not using anymore?
db: sandy is really providing the leadership there, it's interesting b/c with
wolf you had a pure manager, and with lemens you had more of a technologist, i
suspect sandy is a blend of the two, sandy comes to our executive staff mtgs and
our planning mtgs and provides great input and insight into where we're trying
to go, and underneath him there are a handful of individuals that are very
bright, that provide technology leadership, and i won't go through the detailed
list of those names, but the relationship - kernel level engineering, we do
believe we have some of the brightest people in the world on our staff.
al: ok, and on the sco IP web site - you said you are going to be keeping that
up to date as you go forward?
db: yes, absolutely
al: great, i noticed that the daimer=chrysler and autozone cases seemed to drop
back in november, is that something you'll be catching up on?
db: yeah, there hasn't been a lot of new information in those particular cases,
particularly with the daimler case -
al: but the whole IPO and thing (???)
db: i know you're, i've seen some of the things out there, you're pretty good at
tracking these things down, maybe you can help blake out a bit...
al: sure
db: the autozone case i would point out is going to be interesting here, coming
up here, again, part of t he reason we don't see a lot going on here, as you
recall, we had a requirement to be back in front of the judge, and based on the
early discover we got, both sides agreed to go through another round, and that
will be coming ot closure here in the next several weeks, and we encourage you
all to look towards the result of that get-together out in nevada, that will be
coming up sometime after may 9
al: and daimley chrysler, then who is making out (???), what's the are you going
to leave that until something else happens with IBM?
db: yeah, the daimler case, the attorneys are basically reviewing our options
there, there was some quirky things about the appeal process and how that works
under michigan state law, based on the substantive nature of claims versus the
timeliness claim, and it's still a little bit up in the air, and the legal team
is still reviewing their options, and that's basically where that one is
al: ok, one last thing, on apr 21 hearing, you said you wanted to delay that to
later on the amending your complaint issue?
db: right
al: apr 21 is also going to be hearing to depose sam pallimo [[IBM head, sp?]]
are you still hoping for that to go forward or ..?
db: right, i believe the plan is still for that to happen on the 21st, but if
hte court decides that since we're all getting together the following week on
motions to unseal, if they want to move it then or to another date, our legal
team is okay with that, but we don't actually have a ruling yet on what happens
there in any event, we're still waiting for the court ot rule on the issue on
the 21st, again, the main driver for us on the 21st was that we looekd to bring
additional claims and amend our pleadings if you will, it doesn't make sense to
tighten all these little things down at once, either through a renewed
scheduling order or through a different time, so that was the reason for the
request to vacate
al: ok, thank you
db: all right, yep, thanks al
time: 36:22 -37:35
oper: we'll have our next question from deon cornett from decauter jones
jg: thank you again for taking my call, i just wanted to follow up on a
question, in reference to proceedings, do you have any subsidiaries that are
presently under any legal proceedings?
by: no, no we don't, i guess this is james?
jg: yes, i'm sorry, this is james again for deon
by: no, no i don't, and you aksed this question about the 10k, i'll go back and
look at it, but i'm sure all we're talking about in the legal section there is
the current legal lawsuits, there's nothing else -- now we do talk about our IPO
class action lawsuit that's been settled, we're still disclosing that, but
there's nothing new that's come up in terms of legal matters
jg: right, i'll just mention two palces -- page 42 and 78 of your 10k -- it's on
risk factors, page 42 on risk factors, and on page 78, other matters, is where
the particular wording which is being looked at, caused some questions there...
by: ok, we'll look at it, maybe we can talk about it offline
jg: ok, that'd be great
by: ok
jg: thank you
time: 37:35 - 38:33
oper: we'll go next to maureen o'gara, client server news
mg: gentleman
db: hello maureen
mg: is it my understanding that scoscoure produced absolutely no revenue this
quarter?
by: no maureen, we had 70,000$ of revenue
mg: i'm sorry, i missed it somehow, that came from where?
by: well, we had a couple of arrangements in prior quarters that continue to go
forward and will go forward for a few more quarters, and we had a few additional
people purchase license in Q1
mg: i see, can you identify any of those people?
db: we're going to protect their identies for time being so they can run their
business
mg: uh-huh, thank you
oper: and it's *1 if you'd like to ask a question...
time: 38:33 - 43:38
oper: and we'll go next to wolfgang browner with hardware guys
wb: hi guys
db: hi tom (??? tom ??? wtf?)
wb: i would like to follow up on this question that <susplouse?> asked,
now with the lion's share of pratically all revenue coming from the unix system,
how would you describe the importantce of the unix business to the scosource
licensing program going forward in the near future? how would you weigh the
importance of both to your overall businesS?
db: i think they're both important parts of the business, i view it all as part
of one initiaive here, which is driving revenues from our major product lines
and ownership of the unix technology. the technology marketplace initiative is
obviously where we are with our products, driving those forward is very
important to our customers, reclaiming money we feel are due us that we feel we
have been damaged over the years is part of the process of going backwards and
is probably more important to our shareholders, where the first one is more
important to our customers -- but they're both important -- my current view on
the initiatives i guess as you look at hte product side of things, this open
server launch, the legend launch, is pretty exciting for a lot of our customers,
it's been 7 or 8 years since we've had this sort of a major upgrade in
functionality to openserver, even though we have millions of servers around the
world running, it's a chance for peopel to really upgrade their systems, and the
primary reason for upgrading their system is so they can tap into a lot of new
application power that's coming around from the different ISPs (ISVs?)...
wb: you said early in the fall that the liecnsing program is very challenging or
difficult to predict, would it be too strong to say that it has become less
important for sco going forward?
db: no, i wouldn't say it's less important going forward, i'd say right now it's
a very challenging environment to be selling the scosource licensing program,
when we started the scosource licensing program as a historical footnote, it was
promptd by customers that had come in asking us if you would have some kind of
license like that available given the legal claims you're making in the
marketplace, we put that program together, we started to make some sales, things
were moving along, and then roughly a year ago, we had a number of 3rd party
companies, there's probably over a half dozen companies out there that stepped
up and said "we're going to provide indemnification to basically pre-empt
you from taking a scoscoure license, i'm sorry, indeminification from having to
worry about sco lawsuits in the future", which basically then had a lot of
other customers come back and say, well, they are either going to take one of
those licenses or they are going to come back when our claims are more complete,
and then talk about a license. so my view on this trajectory of the scoscoure
licensing is that its probably not going to kick in fully until we have some
legal courtroom wins, and that's why we're focused on winning htere in the
courtroom. we also have am ajor website that's out there that has stated their
core reason for being is to try and destroy sco and to try and put a big damper
on what our claims are in the marketplace, and so we have a lot of
misinformation flying around out there on this web site, and the reality is that
the website is full of misinformation, including hte people who are actually
running it, and i think when you get to the point where you start to strip away
the people that are in front of groklaw, i think you'll find that pamela jones
is not who she says she is, and hte key to finding out who is behind groklaw is
to understand who is pamela jones, and we think that when you get to the point
where you find out some of hte things that wek now, you'll find out that
everyone is being misled as to who she says she is, and t hat the identity of
pamela jones is much idfferent than is advertised, so, some of those things that
are happening over on that website are having a dampening effect on scoscource,
and as some of these issuesb ecome more transparent in the public marketplace,
we think that will have an impact as well.
wb: ok, thank you.
db; ok.
time: 43:39 - 55:28 (END)
oper: we'll have our next question from george white, gartner
gw: ok, hi, i think you answered some of this, but i just wanted to clarify on
that last issue about scoscource
darl: yeah
gw: that you had originally sent out well over 1,000 letters to various users in
the linux community, and i gather by what you're just saying now is that - that
is kind of an effort on hold until you receive more of a resolution in this
particular case, but that you can always revisit that and require or ask for
users to take out a license with sco if you're successful?
darl: i think that's the right way to view it george, i think the correct
sequence of events here is let's go ahead and settle the claims inside the court
rooms, and as it relates to linux, obviously there's the two main cases there,
the IBM and AutoZone, so let's get through these cases and obviously novell has
some impact as well -- so let's go ahead and work through these cases and when
we're done, a lot of the companies we have talked to and have been talking to,
have stated, "look, if we've got a problem here, we'll step up and resolve
it" -- so, i think rather than putting a lot of energy behind that, or
creating an environment that is somewhat vague based on the courtroom issues
have not been resolved, let's go ahead and finish off the courtroom decisions
and then we'll revisit the issue. i think at the end of hte day, it's real
simple -- it's buy now or buy later, and they want to wait til later, we're fine
with that.
gw: so you haven't really given up on what you think is the legality of the
issue, that there is code that the linux community is ostensibly running that
you feel has been misappropriated, from the fact that you claim IBM volunteered
that code to the linux community
darl: i think as you go -- to say it real simply -- if you read our filings,
which we stand behind 100%, that's the essence of what we're talking about, that
IBM has misappropriated information that has caused problems inside of linux,
and we'll continue to drive through those issues and try and get a courtroom
verdict that resonates with what we believe to be true
gw: and there's a second issue here too, because during this process you've also
said that because of this you've revoked the license, the Unix System V license,
that IBM has to its AIX operating system
darl: right
gw: is that still part of this case, and you know, you haven't really gotten any
satisfaction obviously from IBM, and they are continuing to license AIX, but
again, if there is a favorable decision in this case, are you going to pursue
that in terms of IBM's legal rights to system V?
darl: absolutely, we have a number of claims on the table right now, and the
cancellation of AIX went all the way back to i believe it was june of 2003, is
one of them, and so that is absolutely an issue we will be addressing at the
appropriate time. again, we fundamentally believe that the actions that IBM
took as it related to not just AIX but also Dynix, are what has created the
problem inside of linux. you know, there's a lot made of us having a lot of
beefs with the linux community, we really, it's not where our problems are
centered, the problems are centered on what IBM has done that has caused
problems for the linux community, and we believe that when we get through with
our claims and we're able to have everything heard, that that's the way its
going to play out
gw: if i could ask one last question, during this discovery process could you
give us any timeframe when during this discovery -- which i think you're asking
for more information -- you'll be able to reveal more specifics with regard to
the violations, the trade secrets, you know specifically where and how the code
is violating your IP?
darl: right
gw: where will that point be that we'll learn more about the specifics
darl: the specifics -- i'm not going into the details right here of going
through all of the claims and everything that is out there, whether it's
copyright or contract or whatever it may be -- but the core issue of being able
to prove our claims in front of a jury is dependent on, to make those claims
fully and 100%, is dependent on getting the information that the court has
ordered IBM to deliver to us. and some of that, as a result of the court order
that was issued a couple of months ago, some of that information has shown up,
there's more that's supposed to be showing up here in a few weeks, and so we're
busy cranking through what we've been receiving. and we definitely look forward
to the day where we will have that information going front and center in front
of a jury here in utah.
gw: thank you.
darl: thanks george.
[time: 49:11]
oper: we'll have our next question from gregory brauner, billmans beck
gb: [note: mic problem, extremely quiet] hi, i was wondering when you planned on
filing an S1 so that [...?] securities so that securities that are registered
under an S3 will be allowed to trade again?
by: uh, i didn't quite hear that, are you asking about when our S1 will be
filed?
gb: yeah
by: we would certainly think within the next week or two, we will make the
initial filing to the SEC for their review process. we just received
information from baystar that we needed to complete that, so even next week we
could get the draft filing in front of the SEC, and then of course you know they
have a timeframe they go through to do their review, and we're working ot get
that completed just as quickly as they can.
gb: my next question is, i noticed the compensation was way down, and i wondered
how you planned on retaining key executives as well as technical employees given
that you're trying to [constrain expenses?]
by: well, the main reason for compensation being down is just less people here.
it's not like we've cut -
darl: are you talking about executive comp or the overall comp?
gb: executive comp primarily
darl: yeah, on that front, we have stock option plans in place and we have
incentives in place for bonus plans, for this year as well. so the combination
of those two, and the plans are out there on the stock and bonus not just for
the executives, but for the rest of the company as well
gb: ok, thank you very much
darl: thank you
time: 51:00
oper: and we'll have our final comment robert mann, salt lake tribune
rm: hi darl, how ya doing?
darl: i'm doing great, how are you doing bob?
rm: good. i wanted to ask you if you are able to expand any further on just who
pam jones is?
darl: it's an interesting question, what i would say without getting into all
the details of what we do know right now, is that it's not what it is reported
to be, and i believe that anybody that goes over there and spends any amount of
time flushing out the reality of the pamela jones situation will come to the
understanding that we have, and the knowledge that we have, that all is not as
it appears in groklaw land, and you know, clearly there are a lot of - there is
a lot of spinning, a lot of hype over there around virtually anything that is
about SCO to the negative, unlike traditional media outlets such as yourself
that will take more of a balanced approach on things. we appreciate that we do
have things that people say about us that deservedly need to be talked about
that are negative, or so, this disaster we had going through the nasdaq listing
this last quarter was no fun, so we'll be glad to take our lumps, but the whole
situation of having a web site that is up there that is so biased and has only
one thing to say which is how do we destroy SCO, i believe that when that
happens, you need to understand who is behind that, just like when you read a
book you tend to go to the author as to the creditibility. well, we live on
transparency here with this company, we're as transparent as you can get at this
point after having just gone through this restatement process and the 10k
process and the 10q's and all of you have had a chance to see who and what we're
all about, let's turn some of that same energy toward the other side and find
out who these other people are just so we can have a fair fight
rm: well, certainly she has, pam has had a close relationship with the open
source community, and one point took a job but then backed off, are you also
saying she has some sort of connection to IBM perhaps?
darl: i don't want to go to the IBM card, what i want to go to is who is pam
jones, and it's about credibility, and i believe once people learn some of the
things we've come to learn, there is going to be a serious question as to the
credibility of that organization
rm: well, when do you plan to release what you've learned then?
darl: we're still digging to the bottom of this, i think once we have all of our
facts complete, we'll be glad to do that, we're near the bottom of what that
situation is all about, and we'll be glad to do that at a certain point in time
rm: okay
darl: okay
time: 54:00
oper: and that does conclude today's question and answer session, i'll turn the
conference back over to darl mcbride for any closing remarks
darl: ok, thanks a lot. so in summary, while there has been a lot of
distraction in the press regarding our SEC filing and nasdaq listing, we have
remained focused on our business and delivered good results. the companies unix
business is continuing to generate solid cash flow, the legal fees are in line
with expectations, we have introduced the next-generation unix platform that is
receiving strong reviews in the marketplace, and we have made solid progress
with regard to our litigation effort and look forward to having our case heard.
as to the nasdaq issue, let me just say that while it's been a real pain, i'm
proud that our internal systems identified the issues and we took the right
measures to correct them. we are and will always be a company predicated on
transparency, and doing what's right for our shareholders, customers, and
employees. and that's all we have for today, thanks again for joining the call,
and we look forward to reporting our 2Q results here soon. thank you.
oper: that does conclude today's SCO group 1st quarter 2005 earnings conference
call. you may disconnect at this time. we do appreciate your participation.
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