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Slim Media Coverage of SCO's 3Q Conference Call
Thursday, September 08 2005 @ 08:40 AM EDT

There has been almost no media coverage of SCO's 3Q conference call. Nobody cares any more, I guess. Journalists loved the story when they thought SCO was going to destroy Linux. Now that the tables are turned, they are busy elsewhere. It is painful to watch a company destroy itself. Or perhaps journalists are tired of not being able to ask questions at SCO's conference calls. Whatever it is, I've seen more coverage of the MySQL story.

Bob Mims faithfully reports for the Salt Lake Tribune:

Revenues for The SCO Group continued to slide in its most recent quarter, with declining product sales and hefty litigation costs. The Lindon-based software maker . . . registered just $9.35 million in total revenue for the quarter ending July 31 - nearly 17 percent off the $11.2 million of a year ago.

SCO lost $2.37 million, or 13 cents per diluted share, as the cost of its SCOSource Linux-related licensing campaign - typically and largely comprised of its federal court lawsuit expenses - dipped to about $3.1 million from $7.4 million recorded for fiscal 2004's third quarter. . . .

Meanwhile, SCO reported its licensing sales reaped just $32,000, down sharply from $678,000 for 2004's third quarter. Sales of its UNIX products, despite the ambitious release of SCO OpenServer 6 in June, were off about $1 million to $7.9 million for the quarter.

And the Santa Cruz Sentinel covered it, repeating the same bleak numbers, as well as Darl's positive spin, and the article says SCO now has 190 employees, "including about 40 in Scotts Valley".

Analyst Gary Barnett of Ovum tells it like it is, SCO is failing:

Revenues for Q3 of fiscal year 2005 were $9.4m, compared to $11.2m for the comparable quarter of the previous year. This shortfall was attributed by the company to "continued competitive pressures on the company's UNIX products and services and a decrease in SCOsource licensing revenue". Net losses declined to a little over $2m from over $7m in the previous year. Over the same period, SCO's balance sheet saw current assets decline by more than half from 55.4m to 29m.

Comment: SCO is failing. The company's "SCO Source" licensing program cost over $3m in the last quarter, and earned the company revenues of $32,000. The company's UNIX revenues continue to decline, as the "continued competitive pressures" cited in the company's earnings release continue a trend that's been running for several years now.SCO has managed to reduce its net loss, by slashing sales and marketing spend by 30% and R&D by 25%. But in both instances, these cuts will hamper rather than support any fantastic recovery that CEO Darl McBride might be hoping to pull out of a hat.

Perhaps the most alarming trend in SCO's figures is the decline in the company's current assets - down to $23m from $48m between the last quarter and the same quarter the year before. SCO appears to be burning through its current assets at an alarming pace.

That's just a snip from a larger report. So that is the headline, that SCO is not a headline any more. The media has downsized SCO. It's now a local story.


Slim Media Coverage of SCO's 3Q Conference Call | 193 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections (if needed)
Authored by: bcomber on Thursday, September 08 2005 @ 08:43 AM EDT

[ Reply to This | # ]

Off Topic links and comments
Authored by: bcomber on Thursday, September 08 2005 @ 08:45 AM EDT

You know the drill

[ Reply to This | # ]

Going Concern?
Authored by: John Hasler on Thursday, September 08 2005 @ 08:47 AM EDT
Seems like it is going to be hard for the auditors to certify TSG as a going
concern come the end of the fiscal year.

[ Reply to This | # ]

Slim Media Coverage of SCO's 3Q Conference Call
Authored by: Anonymous on Thursday, September 08 2005 @ 09:11 AM EDT
Is it just me, or are the pundits (DiDio and Co.) amazingly quiet all of a
sudden? Or are they just not spewing fallacies anymore so they are under the

Just wondering, I never read their rags anyway.

James, to lazy to logon.

[ Reply to This | # ]

I was nearly 100% sure
Authored by: Anonymous on Thursday, September 08 2005 @ 09:19 AM EDT
There was going to be an influx of cash from somewhere that was going to keep
SUCX alive. Now I'm only about 30% sure. I was sure MS was going to take
advantage of this and spend 10-30 million to keep the farse going, but maybe SCO
is too visible and with MS's antitrust ruling, to dangerous to associate with.

I know the opprotunity created for the opposition by keeping this going is very
tempting, so I'm still waiting to see if they somehow 'sneaky pete' some money
to SCO.

Which got me to thinking, if MS has a Linux lab, does anyone know if they
purchased a SCOsource license?

[ Reply to This | # ]

How long to bankruptcy? SEC investigation?
Authored by: fudisbad on Thursday, September 08 2005 @ 09:29 AM EDT
I'm surprised someone didn't ask this at the conference call (if they did, it
would be mentioned on Y! SCOX).

The question is, taking into account these current figures, when do you think
SCOX will go bankrupt? I'd say by the end of the year, when I think Novell gets
SCOX's assets escrowed.

See my bio for copyright details re: this post.
Darl McBride, show your evidence!

[ Reply to This | # ]

SCO burning out...
Authored by: Juggler on Thursday, September 08 2005 @ 09:38 AM EDT
If a lousy company like SCO is going to burn, I would prefer a blazing flash
rather than smoldering embers.

A fire is a fire though...

[ Reply to This | # ]

Slim Media Coverage of SCO's 3Q Conference Call
Authored by: Anonymous on Thursday, September 08 2005 @ 10:22 AM EDT

Well, take away the saying of outrageous things about IBM, Novell, Daimler-Chrysler, AutoZone, Linux or Unix from their quarterly conference call and all that's left is a story about a 10-50 million dollar company.

Let us remember the old aphorism: Dog bites man, not news; Man bites dog, news. A small company losing its shirt after it sues IBM over ip. Not "news." It isn't really "news" that a small business impacted by a disruptive technology may have turned a corner three years ago by engaging in a sober assessment of their products and the market and figuring out how to use the disruption to their advantage.

The financial statement and the press release say a lot more than management would say at the conference call, so the editors rewrite the press release, give it an 1/8th column and move on.

[ Reply to This | # ]

Slim Media Coverage of SCO's 3Q Conference Call
Authored by: ChefBork on Thursday, September 08 2005 @ 10:44 AM EDT
I especially enjoyed this snip from the OVUM News article lead in:

Our advice to potential customers remains the same as it has been for over two years; Don't buy an SCO source licence unless SCO gives you a money-back guarantee and places your money in escrow (remember SCO's claims are allegations which are a long way from being proven).

If you're considering buying OpenServer you need to look at your options. If you need more licences to support an existing deployment, there is no need to panic - Open Server may change hands in the next couple of years but it won't disappear. Over the longer term you should consider alternatives from both the open source community (Linux) or from other Unix vendors (notably OpenSolaris on x86).

If you're not yet committed, then we'd urge caution. The long-term decline in Open Server revenues is unlikely to see a turnaround, and SCO's commitment to R&D raises serious concerns. SCO invested under $2m in R&D over the last quarter (down by 25% compared with the same period in the previous year). If you compare this R&D investment with the investment that is being made into Linux by companies such as Redhat, IBM and Novell, you'll see that at least 50 times more R&D money is being invested in Linux across the community. In Redhat's Q1, it spent more than four times what SCO did on R&D in its Q3. If you then compare SCO's R&D with the investment made by proprietary operating system vendors such as Microsoft, Sun or IBM, SCO's $2m becomes a rounding error.

Bold is mine.

These people get it!

If two heads are better than one, then why are liars two-faced and being of two minds indecisive?

[ Reply to This | # ]

Stock price fixed?
Authored by: Anonymous on Thursday, September 08 2005 @ 10:47 AM EDT
Although the prospects are bleak, even today stock price is higher than 6 months
ago: more buyers than sellers?

[ Reply to This | # ]

That's It? The Show's Over?
Authored by: TheBlueSkyRanger on Thursday, September 08 2005 @ 12:15 PM EDT
Hey, everybody!

That's it? No outrageous statements that threaten to disrupt the private lives
of those telling the inconvenient truth? No "Hollywood remake"
reinterpretation of the facts? (If you suffered through Demi Moore's Scarlet
Letter like I did, you'd know what I'm talking about.) No wookies? Nothing to
grab headlines and grease the hype machine?

Ya think mebbe those countersuits for things like misrepresentation have more
heat than SCO acknowledged in the past? Big Lawyer is watching you.

The drop in money is nothing less than astounding. Where is it all going?
AFAIK, no new lawsuits were filed between the time they announced they had
enough cash to see this through to the end and now, but it doesn't look like
they'll go the distance. I know renting Yankee Stadium to showcase an OS no one
is buying is expensive, but is it that bad? I'm very curious about the money

I'm guessing this is the final proof that SCO sees the writing on the wall, any
positive spin is simply Darl doing his job and he knows it won't become reality
until the next planetary superconjunction. Which is a shame. Darl not only
made the Linux community stronger, but he was so entertaining when he employed
the footgun.

To quote Lou Reed (with a little sanitizing for standards here): Stick a fork
in 'em, they're done.

Dobre utka,
The Blue Sky Ranger

"Now you swear and kick and beg us
"That you're not a gambling man.
"Then you find you're back in Vegas
"With a handle in your hand."
--Steely Dan
"Do It Again"

[ Reply to This | # ]

Gloating aside, this is terrible news
Authored by: Anonymous on Thursday, September 08 2005 @ 01:33 PM EDT
We want these lawsuits to go through to their bitter conclusion. If SCO folds
before they complete, then someone else (I wonder who?) can sweep in, buy their
'assets' and start the ball rolling again. And that now includes a precedent
that they need access to all of IBM's source, ever.

At this point it would even make sense for *IBM* to pump money into SCO to keep
it going!

[ Reply to This | # ]

Transcript available?
Authored by: red floyd on Thursday, September 08 2005 @ 01:52 PM EDT
I there a transcript of the ConCall available?

I don't want to a) give SCOX my email, and b) download audio. I'd much rather
*read* it.

Or did SCOX state the call was copyrighted, and could not be reproduced without
their permission?

I am not merely a "consumer" or a "taxpayer". I am a *CITIZEN* of the United
States of America.

[ Reply to This | # ]

Slim Media Coverage of SCO's 3Q Conference Call
Authored by: geoff lane on Thursday, September 08 2005 @ 01:56 PM EDT
When IBM are making pro-Linux TV ads and Microsoft are publishing anti-linux ads you can be pretty certain that Linux is now a major player in the computer business.

It must drive Gates crazy that there is nothing they can fight Linux with except cheap FUD which doesn't stick even when thrown very hard and the pathetic TCO arguments that don't even address the real reasons why people and companies choose FOSS over Microsoft products.

If only TSG had embraced Linux rather than behave like carpet-baggers. With their experience and customers they could have prospered rather than die, publically and slowly.

I'm not a Windows user, consequently I'm not
afraid of receiving email from total strangers.

[ Reply to This | # ]

Slim Media Coverage of SCO's 3Q Conference Call
Authored by: rm6990 on Thursday, September 08 2005 @ 04:22 PM EDT
SCO continues to Lose Money by Steven J. Vaughan-Nichols.

[ Reply to This | # ]

What of Novell's claim?
Authored by: Anonymous on Thursday, September 08 2005 @ 04:48 PM EDT
The cases involving both IBM and Novell have been meandering through the court
at a leisurely pace lo these past couple of years.

But now with Novell claiming megabuck$ beyond what SCOX has on hand, and with
SCOX having demonstrated that they continue to burn through what little cash
they have like the proverbial drunken sailors on shore leave, might we see in
the next week or so Novell making a determined push to have the courts
immediately order that whatever filthy lucre is left in SCOX's sorely depleted
coffers be placed in escrow?

Of course, this would render the poor widdle litigation house insolvent, and
thereby out of business...

[ Reply to This | # ]

good cost cutting
Authored by: Anonymous on Thursday, September 08 2005 @ 05:22 PM EDT
They lost 2.4M.
3.6M in legal fees.
Without legal fees,they would have made money; that is amazing! Whatever else
you say, they did a great job of cost cutting. When McBride took over, they had
far more revenue, and were losing far more money.

Of course in the last year they cut marketing by 30%, and R&D by 25%.

One interesting note, 2.0M was the fixed rate for legal fees, this means they
paid 1.6M in uncovered expenses; this gives us an idea of what their expenses
will be after the fixed fees are covered.

Note with the legal "expenses," but without the fixed legal fees they
would have made .4M.
Assuming that revenues continue to fall, by the end of the fixed 2M a quarter
fees, they will probably be at a breakeven point.
Does that make them an ongoing concern? Whjo would have thought it?

I hope Novell vacumes off a bunch of that cash.


[ Reply to This | # ]

Media coverage changing
Authored by: Anonymous on Thursday, September 08 2005 @ 06:05 PM EDT
Journalists loved the story when they thought SCO was going to destroy Linux.
And so-called journalists also loved the story when they thought IBM was going
to destroy SCO.
The tables are indeed turning.
Many journalists get more cautious and prudent.
Or silent.

[ Reply to This | # ]

Media will return to watch SCOtanic's final gurgle
Authored by: dmarker on Thursday, September 08 2005 @ 07:59 PM EDT

Agree, the press no longer appears to see merit in SCO' claims and antics.

Perhaps the journalists who are smart know it is all over and don't want to be
associated with the final decline

Perhaps the less smart journalists have seen too many of their compatriots crash
and burn at the hands of Groklaw's collective attention & are not willing to
take the risk of receiving a scathing and formidable intellectual savaging as
has happened to others (what journalist wants to be shown to be either a paid
hack or just plain sucker dumb)

But I am sure the final SCOtanic gurgle will attract a last round of press
obituaries :)

Doug M

[ Reply to This | # ]

Question about the legal cap..
Authored by: TeflonPenguin on Thursday, September 08 2005 @ 08:16 PM EDT
As I understand the cap, they owe BSF 2 million a quarter for 2 more quarters.
But is the Novell suit covered under that cap? That one is about to head to
some expensive protracted discovery which SCO can not afford to cut any corners
on. If they do not prevail there it is over. Does any one know if the Novell
suit/counterclaim is capped as well?


[ Reply to This | # ]

IT Manager's Journal - Will SCO be around to collect if it wins?
Authored by: stend on Thursday, September 08 2005 @ 08:58 PM EDT

From an article I saw on Google News:

Always the optimist, Darl McBride, president and CEO of The SCO Group, put on his rose-colored glasses and described the recent financials as "a productive quarter for SCO." Unfortunately, SCO did not take questions during its conference call so no one could ask how he might define an "unproductive quarter."
For example, in its first fiscal quarter, Red Hat invested more than four times what SCO did in R&D in its third quarter. If you then compare SCO's R&D with the investment made by companies such as Microsoft, Sun or IBM, SCO is not even in the ballpark, much less on the playing field.

Please see bio for disclaimer.

[ Reply to This | # ]

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