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SCO Files Its 10Q Sob Story - Updated
Thursday, September 14 2006 @ 04:12 AM EDT

SCO has filed its 10Q for the quarter ending July 31, 2006, and it's a sad story of decline, which it blames squarely on everyone but itself:
Revenue from our UNIX business decreased by $1,931,000, or 21%, for the three months ended July 31, 2006 compared to the three months ended July 31, 2005 and decreased by $5,549,000, or 20%, for the nine months ended July 31, 2006 compared to the nine months ended July 31, 2005. The revenue from this business has been declining over the last several periods primarily as a result of increased competition from alternative operating systems, particularly Linux. We believe the inclusion of our UNIX code and derivative works in Linux has been a contributor to the decline in our UNIX business because users of Linux generally do not pay for the operating system itself, but pay for services and maintenance. ...

Our SCOsource revenue for the years ended October 31, 2005 and 2004 was significantly lower than revenue generated during the year ended October 31, 2003, and we believe and allege our revenue and related revenue opportunities have been adversely impacted by Novell‚€™s claim of UNIX copyright ownership, which may have caused potential customers to delay or forego licensing with us until an outcome in this legal matter has been reached.

I hate to break the news, but I don't think anyone is foregoing or postponing licensing with SCO. I think they don't plan on doing so ever.

Their tale of woe is compounded by legal expenses, as described in the Risks section, those expenses going up just as their income is going down. It seems they had to fill up the escrow glass again in June and those experts aren't cheap:

On June 5, 2006, we entered into an amendment to the Engagement Agreement and agreed with the Law Firms to deposit an additional $5,000,000 into the escrow account to cover additional expert, consulting and other expenses. In the event that we exhaust these funds, we will continue to pay for expert, consulting and other expenses through the conclusion of our litigation with IBM. As we continue with discovery and other trial preparations, we may be required to place additional amounts into the escrow account, which could harm our liquidity position. As of July 31, 2006, we had a total of $13,960,000 in cash and cash equivalents and available-for-sale marketable securities and an additional $1,561,000 of restricted cash to be used to pursue the SCO Litigation. Since October 31, 2004, we have spent $8,439,000 for expert, consulting and other costs as agreed to in the Engagement Agreement with our legal counsel in the SCO Litigation.

How about that? 8 1/2 million dollars in about two years just for experts and consultants. Let's face it. It has to be hard to get anyone to agree to help you if you are the SCO Group.

I am imagining SCO approaching an expert and asking for help with the litigation. "Could you say that errno.h violates our copyrights or copies our methods and concepts?" And in my imagination I hear the expert snort, "Hah! Maybe for a cool million!" "Done," says SCO, reaching into a suitcase.

Joke, joke. But 8 1/2 million is a lot of money, particularly since it's on top of the $26 million already paid for attorneys' fees. Only a million and a half left in the escrow pot. And no end in sight.

Here's the breakdown:

The Company incurred a net loss of $12,855,000 for the nine months ended July 31, 2006 and during that same period used cash of $7,050,000 in its operating activities. A significant portion of the net loss and the cash used in operating activities was associated with the Company protecting and defending its intellectual property rights. As of July 31, 2006, the Company had a total of $8,861,000 in cash and cash equivalents, $5,099,000 in available-for-sale marketable securities, and $2,010,000 in restricted cash, of which $1,561,000 is designated to pay for experts, consultants and other expenses in the SCO Litigation, and the remaining $449,000 of restricted cash is payable to Novell for its retained binary royalty stream.

The one advantage to making less is they owe Novell less this quarter. Last 10Q it was $3,200,000. Lower income taxes too. So that's the good news.

Here's the 8K filed on June 8, 2006 announcing the amendment to the agreement with Boies Schiller and the gang, otherwise known as "The Three Original Firms", the amendment being titled First Amendment to the Letter Agreement dated October 31, 2004 among The SCO Group, Inc., Boies, Schiller & Flexner LLP, Kevin McBride, and Berger Singerman:

The purpose of the Amendment is to replenish, as necessary, the escrow account (the "Escrow Account"), which is designed to cover the expert, consulting and other expenses of the current litigation between the Company and International Business Machines Corporation, Novell, Inc., Red Hat, Inc., AutoZone, Inc. and Daimler Chrysler, Inc. The Company and BSF mutually agreed, pursuant to the terms of the Amendment, to initially replenish the Escrow Account in the amount of $5 million.

We also get to understand what Darl McBride was talking about in the recent 3Q financials call, when he mentioned troubles with certification:

The success of our UNIX business will depend on the level of commitment and certification we receive from industry partners and developers. In recent years, we have seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify to our UNIX operating system products. If this trend continues, our competitive position will be adversely impacted and our future revenue from our UNIX business will decline. The decline in our UNIX business may be accelerated if industry partners withdraw their support from us for any reason, including our SCO Litigation.

The problem SCO faces is a kind of Catch 22. No one wants to bother with certification or application development efforts for software not many folks are buying. And then because of a lack of certification or applications, fewer will buy. Here's the part about fewer buying:

If the market for UNIX continues to contract, our business will be harmed.

Our revenue from the sale of UNIX products has declined over the last several years. This decrease in revenue has been attributable primarily to increased competition from other operating systems, particularly Linux. Our sales of UNIX products and services are primarily to existing customers. If the demand for UNIX products continues to decline, and we are unable to develop UNIX products and services that successfully address a market demand, our UNIX revenue will continue to decline, industry participants may not certify to our operating system and products, we may not be able to attract new customers or retain existing customers and our business and results of operations will be adversely affected. Because of the long adoption cycle for operating system purchases and the long sales cycle of our operating system products, we may not be able to reverse these revenue declines quickly.

See, if you put almost all your money into the pot marked "Litigation" and very little into the pot marked "R&D" you can end up with very few, if any, customers. Pipe fairies, maybe. But not customers for your products. And if you quit selling Linux just as it really starts to take off, well, as my mom used to tell me when I was a kid and made poor decisions, "You made your bed. Now you must lie in it."

Their R&D expenses were actually up a bit, but that was, they say, "primarily attributable to increased travel costs and from stock-based compensation."

Of course that isn't the primary problem. Their primary problem I would think would be persuading their customers that they'll still be around a year from now. SCO first says this:

A material, negative impact on the Company's results of operations or financial position from the Red Hat, Inc., IPO Class Action, or Indian Distributor matters, or the IBM or Novell counterclaims is neither probable nor estimable.

OK. That's in the Legal section. But a little further down, they repeat that information, and then they add this:

Because these matters are not probable or estimable, we have not recorded any reserves or contingencies related to these legal matters. In the event that our assumptions used to evaluate these matters as neither probable nor estimable changes in future periods, we may be required to record a liability for an adverse outcome, which could have a material adverse effect on our results of operations and financial position.

I'm not an accountant, but that reads to me like they have nothing set aside and don't plan to set anything aside to pay damages with in the "improbable" event that they lose to IBM et al, because who'd a thunk they might lose? What could be more improbable than SCO losing? And even if it were likely, they don't know how much they'd have to pay. So la de da, no need to plan for an improbable and impossible to estimate rainy day. Here's an article [PDF] that explains the financial accounting rules that SCO is referencing:

Apart from those purely legal considerations, you also must help determine whether the company is required to recognize the potential loss contingency in the financial statements and disclose the existence of the potential suit to shareholders. ...If you reach the wrong decision, your company could be required to restate its financial statements, and perhaps face shareholder litigation, SEC enforcement action, or criminal charges....

A loss contingency is a loss (i.e., the impairment of an asset or the incurrence of a liability) arising from a past event, the amount of which, if any, will be confirmed by a future event that is not within the company's control.

Examples of loss contingencies include, but are not limited to, the threat of or pending lawsuits against the corporation, or its officers if they have been indemnified by the company.

Such a contingency can, in certain cases, obligate the corporation to record a reserve in anticipation of a judgment against the corporation or a settlement, or perhaps disclose the existence of the contingency in its financial statements....

In particular, FAS 5, which establishes standards for financial accounting and reporting for loss contingencies, dictates in paragraph eight that a loss contingency must be recognized as a charge to income if both of the following standards are met:

a. Information available prior to issuance of the financial statement indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss; and

b. The amount of loss can be reasonably estimated.

...However, even if in-house counsel and accounting arrive at a consensus that no accrual must be made because the two conditions in paragraph eight have not been satisfied, the corporation may still be required to make a disclosure of the contingency if it is determined to be reasonably possible.

In such a case, a corporation must "indicate the nature of the contingency and shall give an estimate of the possible loss or range of loss or state that such an estimate cannot be made."

There are exceptions to this rule, however. A corporation would not always be required to disclose a loss contingency where the claim is unasserted, such as where the potential claimant has not demonstrated an awareness of an entitlement to a claim. If, however, it is probable that a claim will be asserted, and there is a reasonable possibility that the claimant will prevail on such claim, then a disclosure is mandated.

Well. That was interesting. There's a lot more in the article. It's well worth reading, particularly in this context. Is it really so that one cannot even provide a reasonable ball park guesstimate of damages if SCO loses? Um. Now that IBM's experts have provided their expertise? Here's the definitions of gradations of likelihood in the rule:

A future event confirming the amount a loss contingency is reasonably possible, the statement provides, when "the chance of the future event or events occurring is more than remote but less than likely." On the other hand, such a chance is remote when "the chance of the future event or events occurring is slight." If the loss contingency is determined to be probable, the loss should be recognized, provided it can be reasonably estimated.

Losing to IBM is not "more than remote"? And can you imagine what their financials would look like if they actually didn't decide such a contingency was improbable and not estimable? Not just red ink. They'd have to invent a new color. Then in the Risks section, SCO says this:

If we do not prevail in our action against IBM, or if IBM is successful in its counterclaims against us, our business and results of operations would be materially harmed and we may not be able to continue in business.

That's the part that may be scaring off customers. Do they sincerely believe losing the IBM litigation is in the improbable category? Then there are these ominous-sounding words, at least if one is looking for a long-term relationship:

Because of the unique and unpredictable nature of the SCO Litigation, the occurrence and timing of certain expenses is difficult to predict, and will be difficult to predict for the upcoming quarters. We will continue to make payments for technical, damage and industry experts, consultants and for other fees. However, future legal fees may include contingency payments made to the Law Firms as a result of a settlement, judgment, or a sale of our Company, which could cause the cost of SCOsource licensing revenue for the three months ending October 31, 2006 to be higher than the costs incurred for the three months ended July 31, 2006.

The case doesn't go to trial until February of 2007, so a judgment before October is pretty much out. IBM has shown zero interest in settling. So that leaves sale of the company. Things that make you go hmm. If I were an employee, I'd probably notice this section:

General and administrative expenses consist of the salaries and benefits of finance, human resources, and executive management and expenses for professional services and corporate allocations. General and administrative expenses increased by $182,000, or 11%, during the three months ended July 31, 2006 as compared to the three months ended July 31, 2005. The increase in general and administrative expenses was primarily attributable to increased professional services costs and stock-based compensation, offset in part by decreased personnel and related costs. General and administrative expenses decreased by $307,000, or 6%, during the nine months ended July 31, 2006 as compared to the nine months ended July 31, 2005. The decrease in general and administrative expenses was primarily attributable to decreased personnel and related costs as well as decreased accounting and legal fees, offset, in part, by an increase in stock-based compensation. Included in general and administrative expenses for the three months ended July 31, 2006 and 2005 was $264,000 and $0, respectively, of stock-based compensation. Included in general and administrative expenses for the nine months ended July 31, 2006 and 2005 was $736,000 and $0, respectively, of stock-based compensation. For the three months ending October 31, 2006, we anticipate that the dollar amount of general and administrative expenses will be lower than that incurred during the three months ended July 31, 2006.

Time to dust off that resume? They seem to be losing service contracts too:

Services revenue consists primarily of technical support fees, engineering services fees, professional services fees and consulting fees. These fees are typically charged and invoiced separately from UNIX products sales. The decrease in services revenue of $179,000, or 13%, for the three months ended July 31, 2006 as compared to the three months ended July 31, 2005 and the decrease in services revenue of $358,000, or 8%, for the nine months ended July 31, 2006 as compared to the nine months ended July 31, 2005 was primarily attributable to a decrease in professional services revenue as well as from a decrease in support and engineering services contracts.

It's just crazy woe after woe. It probably wasn't received well that they started suing their own customers. Folks started lining up at the Exit signs. I guess SCO must feel they flew past the point of no return, and they are course committed now. But it's suicide by courtroom and it's hard to watch. Just think for a minute if they'd put $34 1/2 million into R&D and marketing instead of this wacko litigation. Or just fed the world's hungry. Even that would have made more sense than this endless gushing of money out of every body cavity SCO has straight into their lawyers' pockets. Well, one of the lawyers is Darl's brother, so at least some of it is staying in the family.


  


SCO Files Its 10Q Sob Story - Updated | 278 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: entre on Thursday, September 14 2006 @ 04:23 AM EDT
For PJ

[ Reply to This | # ]

Off topic there
Authored by: Crocodile_Dundee on Thursday, September 14 2006 @ 04:25 AM EDT
remember to be off topic!

---
---
That's not a law suit. *THIS* is a law suit!

[ Reply to This | # ]

SCO Files Its 10Q Sob Story
Authored by: kattemann on Thursday, September 14 2006 @ 04:34 AM EDT
We believe the inclusion of our UNIX code and derivative works in Linux ...
Ah, so desu ka. Is that what's called a PIPE dream, maybe?

[ Reply to This | # ]

Time to dust off that resume?
Authored by: Anonymous on Thursday, September 14 2006 @ 04:39 AM EDT
Anyone still working at SCO has a *serious* ethics problem. Maybe they can get
a job as an HP director, though :)

[ Reply to This | # ]

For One Million USD
Authored by: Anonymous on Thursday, September 14 2006 @ 04:57 AM EDT
I am prepared to stand on a witness stand and say anything SCO wants. This will
achieve three objectives:

1) The SCO Group will be a million bucks poorer.

2) The SCO Group will die quicker.

3) The money (when donated to the Ubuntu project) will aid open source
adoption.

Bet they won't get in touch.

AC

[ Reply to This | # ]

Indian Distributor
Authored by: IMANAL on Thursday, September 14 2006 @ 04:58 AM EDT
What is the "Indian Distributor"?

Never heard of it.



---
--------------------------
IM Absolutely Not A Lawyer

[ Reply to This | # ]

IPO class action?
Authored by: N. on Thursday, September 14 2006 @ 05:25 AM EDT
A material, negative impact on the Company’s results of operations or financial position from the Red Hat, Inc., IPO Class Action, or Indian Distributor matters, or the IBM or Novell counterclaims is neither probable nor estimable.

That's a new one on me - have the shareholders finaly revolted?

---
N.
(Now almost completely Windows-free)

[ Reply to This | # ]

Mistake in SCO's 10Q
Authored by: Anonymous on Thursday, September 14 2006 @ 05:30 AM EDT

On page 20 of SCO's 10Q filed with the SEC, there's a numerical mistake:

The following table shows the operating results of the SCOsource business for the three and nine months ended July 31, 2006 and 2005 (in thousands):

But in the table immediately following this, the amounts are not in thousands, they're in dollars. For example the SCOSource revenue is shown as 31,000 and we know that the correct figure is $31,000 not $31 million.

[ Reply to This | # ]

Shattered at this sad story
Authored by: dmarker on Thursday, September 14 2006 @ 05:54 AM EDT

I am really shattered and so sad for tSCOg.

I really feel so much for these hard done by, clean living, well-intentioned,
hard working, innovative, pioneers of the ultimate money-making plan.

All that great effort and they come to this. Sad, sad, sad.
My heart bleeds & bleeds for them.

DSM

(do excuse the sarcasm) :)

[ Reply to This | # ]

SCO Files Its 10Q Sob Story
Authored by: Anonymous on Thursday, September 14 2006 @ 06:36 AM EDT
I wonder if they're not somewhat happy about revenues being down, after all,
that's all the more ammunition for the "massive damages" they've
suffered.

It's kind of like when SCO said they were happy for the so called
"infringements" to continue, because they got extra damages the longer
the "infringements" we in place. So they didn't do anything to
mitigate that, perhaps they're not mitigating their losses as much as they
could, literally gambling everything on this.

JT

[ Reply to This | # ]

SCO Files Its 10Q Sob Story
Authored by: blacklight on Thursday, September 14 2006 @ 06:48 AM EDT
SCO should start putting their financial reports to music, so that we can break
out the violins. The vocals should be priceless: "the UNIX market
contracted"; "we are the Typhoid Mary of the computer industry";
"it's not our fault that we sued our business partners and our
customers", etc.


---
Know your enemies well, because that's the only way you are going to defeat
them. And know your friends even better, just in case they become your enemies.

[ Reply to This | # ]

Things that make you go hmm...
Authored by: DaveJakeman on Thursday, September 14 2006 @ 06:51 AM EDT
Their R&D expenses were actually up a bit, but that was, they say, "primarily attributable to increased travel costs and from stock-based compensation."
Not content with wrecking the company via their litigation spend, the R&D budget is being squandered on Darl's round-the-world trips and stock deals. R&D expenses -> stock-based compensation? Hmm.
The increase in general and administrative expenses was primarily attributable to increased professional services costs and stock-based compensation.
There it is again: administrative expenses -> stock-based compensation. Double hmm. What budget don't they use for "stock-based compensation"?
The decrease in general and administrative expenses was primarily attributable to decreased personnel and related costs as well as decreased accounting and legal fees, offset, in part, by an increase in stock-based compensation. Included in general and administrative expenses for the three months ended July 31, 2006 and 2005 was $264,000 and $0, respectively, of stock-based compensation. Included in general and administrative expenses for the nine months ended July 31, 2006 and 2005 was $736,000 and $0, respectively, of stock-based compensation.
Yeah, never mind the employees, gotta keep up with the stock-based compensation.

Hmm.

---
Unfortunately for us, common sense is not very common.
---
Should one hear an accusation, try it out on the accuser.

[ Reply to This | # ]

SCO were founded as long ago as 2001
Authored by: Chris Lingard on Thursday, September 14 2006 @ 06:55 AM EDT

SCO have had to tell the truth on this SEC form

Overview
Historical Background. We originally incorporated as Caldera Systems, Inc., a Utah corporation ("Caldera Systems"), on August 21, 1998, and reincorporated as a Delaware corporation on March 6, 2000. In March 2000, we completed an initial public offering of our common stock. On May 7, 2001, we formed a new holding company in Delaware under the name of Caldera International, Inc. ("Caldera International") to acquire substantially all of the assets and operations of the server and professional services groups of The Santa Cruz Operation. In connection with this acquisition, Caldera Systems became a wholly owned subsidiary of Caldera International. Former holders of shares and options to purchase shares of Caldera Systems received an equal number of shares and options to purchase shares in Caldera International. On May 16, 2003, our stockholders approved our corporate name change to The SCO Group, Inc.

No claim here about their knowledge of UNIX history, nor of their existence during the twenty odd years of UNIX being a leader. So they they bought "substantially all of the assets" of The Santa Cruz Operation.and merged it with Caldera International on May 7, 2001; possibly a franchise to sell UnixWare.

The above does not correspond with their claims in court, nor their public statements.

[ Reply to This | # ]

SCO Files Its 10Q Sob Story
Authored by: PolR on Thursday, September 14 2006 @ 07:05 AM EDT
If the PIPE fairy doesn't show soon again, we know it is really all over.

[ Reply to This | # ]

SCO Files Its 10Q Sob Story
Authored by: Steve Martin on Thursday, September 14 2006 @ 07:24 AM EDT

and an additional $1,561,000 of restricted cash to be used to pursue the SCO Litigation. ... Since October 31, 2004, we have spent $8,439,000 for expert, consulting and other costs

Hm. I note that, adding these two numbers up, they total $10,000,000. I also note that back in November TSG received a $10,005,000 cash infusion from a sale of stock to existing investors (including some institutional investors as well as Darcy Mott).

Looks to me like this sale of stock might have been purely for the purpose of propping up the litigation efforts. Is this significant in any way, or am I simply connecting dots where none exist?

---
"When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

[ Reply to This | # ]

Say what?
Authored by: Anonymous on Thursday, September 14 2006 @ 07:34 AM EDT
"As we continue with discovery and other trial preparations, we may be required to place additional amounts into the escrow account, which could harm our liquidity position."

How can they continue with "discovery" when this is complete? This is not discovery for Novell, etc., this fund is just for the IBM litigation is it not?

Someone better tell SCO that they are supposed to be done with discovery by now.

[ Reply to This | # ]

  • Say what? - Authored by: Steve Martin on Thursday, September 14 2006 @ 07:59 AM EDT
  • Say what? - Authored by: elronxenu on Thursday, September 14 2006 @ 08:30 AM EDT
  • Say what? - Authored by: PJ on Thursday, September 14 2006 @ 12:27 PM EDT
    • Say what? - Authored by: Anonymous on Thursday, September 14 2006 @ 06:19 PM EDT
    • Say what? - Authored by: Anonymous on Saturday, September 16 2006 @ 03:06 PM EDT
Arbitration Update
Authored by: DaveJakeman on Thursday, September 14 2006 @ 07:35 AM EDT
From the 10Q:

"The three-person arbitration panel has been selected for the SuSE
arbitration in Switzerland, and that process will be commencing in the near
future. The Company does not yet know the schedule of the proceedings."

---
Unfortunately for us, common sense is not very common.
---
Should one hear an accusation, try it out on the accuser.

[ Reply to This | # ]

Get a grip.
Authored by: Anonymous on Thursday, September 14 2006 @ 07:40 AM EDT
Honestly, I don't believe it serves any business purpose if they'd put $34 1/2
million into R&D and marketing instead of this wacko litigation, when the
next day the results of their effort show up in Linux. Freely available to the
general public as an obligation under the UnitedLinux MTA and JDC.
One could of course argue that pursuing business purposes shouldn't be the prime
interest of commercial enterprises.

[ Reply to This | # ]

Do lawyers define 'probable' differently.
Authored by: Anonymous on Thursday, September 14 2006 @ 08:00 AM EDT
"A material, negative impact on the Company’s results of operations or
financial position from the Red Hat, Inc., IPO Class Action, or Indian
Distributor matters, or the IBM or Novell counterclaims is neither probable nor
estimable."

They are saying they don't have to account for the likelihood that they will be
crushed in court because it isn't probable. Does this count as lying? Do we
have securities fraud here?

[ Reply to This | # ]

The Litigation Business Model
Authored by: DaveJakeman on Thursday, September 14 2006 @ 08:11 AM EDT

I've previously posted flippant comments about SCO's new litigation-based business model. But it's true! SCO are deadly serious about this. It's actually factored into their accounting. SCO have two business units: one called "Unix" and the other called "SCOsource". And SCOsource isn't just about selling licences, it's about scaring the likes of you and me into buying a SCOsource licence through their rattle-their-sabre-and-sue-the-world extortion litigation, because their litigation costs are lumped under the heading "SCOsource Licensing" too. This is what SCO say in their 10Q:

The Company’s resources are allocated and operating results managed to the operating income (loss) level for each of the Company’s segments: UNIX and SCOsource. Both segments are based on the Company’s UNIX intellectual property. The UNIX business develops, sells and distributes UNIX server and mobile products and services through an extensive distribution channel and to corporate end-users and the SCOsource business enforces and protects the Company’s UNIX intellectual property.
So there you have it. It's official. No Joke.

And not funny either.

---
Unfortunately for us, common sense is not very common.
---
Should one hear an accusation, try it out on the accuser.

[ Reply to This | # ]

Professional services costs
Authored by: Cyberdog on Thursday, September 14 2006 @ 08:13 AM EDT
There are several references to 'reduced personnel compensation', 'increased
professional services costs' and 'stock based compensation'.

I translate this to mean

* people are leaving in droves ; we aren't even having to make severance
payments

* we need to bring in contractors to man the turrets

* we have fooled our remaining employees into taking worthless pieces of
paper instead of real money.

It's not so much a case of lie in the bed you made; it's more it sucks to be
SCO!

[ Reply to This | # ]

I Need Help Deciphering A Discrepancy
Authored by: Anonymous on Thursday, September 14 2006 @ 08:19 AM EDT
The revenue from this business has been declining over the last several periods primarily as a result of increased competition from alternative operating systems, particularly Linux. We believe the inclusion of our UNIX code and derivative works in Linux has been a contributor to the decline in our UNIX business because users of Linux generally do not pay for the operating system itself, but pay for services and maintenance. ...

Didn't SCO drop (or have dismissed) all the claims that any of "their" UNIX code was directly copied into Linux? Doesn't that fact make this statement untrue and isn't that a key material fact when interpretting this document and what it means to the business model. Is it legal for SCO to tell their shareholders (in their 10Q) that one reason their buisiness is declining is because of facts that they have also told a judge they can not show proof of (ie. direct code copying from "their" UNIX code into Linux)?

Somebody help, are there still court claims pending of direct code copying from SVRX to Linux?

[ Reply to This | # ]

Me, Inc. & Edgeclick
Authored by: sunnyfla on Thursday, September 14 2006 @ 09:24 AM EDT
Perhaps I don't recall correctly, but didn't SCO at some point say they were
having great success with Me, Inc. and Edgeclick? Shouldn't there be both
income & expenses related to these items?

[ Reply to This | # ]

Because of the unique and unpredictable nature of the SCO Litigation
Authored by: Anonymous on Thursday, September 14 2006 @ 09:55 AM EDT
News flash: SCO tells true!.

Unique: I have to agree with this.

Unpredictable nature of the SCO Litigation: I have to agree with this also.

Even after 3+ years of observing the SCOundrals, even knowing that they twist
and turn like a rollercoaster, knowing that they are going to throw the curve
ball (or bowl a leg-break), I still find them unpredictable.

Even the cash infusion methods are unpredictable.

But I think that the scope of unpredictability is narrowing. The vice is
starting to tighten and the squeeze is on. (I hope).

[ Reply to This | # ]

The bets are placed, this is all or nothing.
Authored by: Anonymous on Thursday, September 14 2006 @ 09:59 AM EDT

This caught my eye with the impact of a sharp stick:

Then in the Risks section, they say this:
If we do not prevail in our action against IBM [...] our business and results of operations would be materially harmed and we may not be able to continue in business.
(emphasis mine). TSCOG is admitting that, if they don't outright win this litigation, they are toast. Ties, draws, settlements, sacrifice fly balls all mean the game is over for them. Poof! Their only remaining chance is to hit a home run (and they probably have to first load the bases as well).

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Never mind the accounts
Authored by: DaveJakeman on Thursday, September 14 2006 @ 10:07 AM EDT
This is the one financial statement that matters: "We do not have a history
of profitable operations... As of July 31, 2006, our accumulated deficit was
$247,797,000."

---
Unfortunately for us, common sense is not very common.
---
Should one hear an accusation, try it out on the accuser.

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Two things?
Authored by: Anonymous on Thursday, September 14 2006 @ 10:19 AM EDT
One, talking about certification. We already know that instances like mysql,
putting SCO's name, or Sco putting your name with thiers is a very negative
thing.
Also, just curious.
In the hypothetical event that this goes to trial AFTER the company is
parted/sold, who would recieve the money on a SCO positive judgement?

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Jon 'Maddog' Hall - very damning for SCOX
Authored by: neal_r_rauhauser on Thursday, September 14 2006 @ 10:36 AM EDT

I bumped into Jon 'Maddog' Hall at a trade show yesterday and he told a funny
story about how Linus Torvalds got a Lifetime Achievement award from Uniforum.
It seems that in 1997 the CEO for the Santa Cruz Operation pushed this honor
through the Uniforum committee responsible for such things, then presented it to
Linus personally.

http://www.youtube.com/watch?v=8LdmCox7gvA

Jon also told a funny story about a conversation he had with Darl McBride a
while back, but he swore me to secrecy - can't tell it until SCOX v. IBM is
finalized. I hope I run into him again, as that particular tale very much
deserves a direct, personal telling like this bit about the Uniforum award.


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17 man years, or so
Authored by: Anonymous on Thursday, September 14 2006 @ 11:03 AM EDT
If you use a weighted average of $250/hr (some will be much higher, but this is
a starting point), the $8.5 m is only 17 FTEs. I would conjecture that IBM has
used significantly more resource in their defense. So, I don't find that number
that high, it's expensive to support the tSCOg business model, whether fact or
fantasy based.

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SCO's next Lawsuit
Authored by: mram on Thursday, September 14 2006 @ 12:21 PM EDT
By making public statements like "we will convert linux into a super
highway" IBM deliberately misled SCO to undertake the fatal lawsuit,
leading to consummate demise of SCO and UNIX (which SCO belived at that time, it
owned - actually as SCO was led to believe by Novell - by making statements that
SCO did NOT actually own UNIX).

Now SCO seeks damages from IBM for the same - the exact amount of which will be
determined once discovery is completed.

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Taking over SCO customers
Authored by: Anonymous on Thursday, September 14 2006 @ 12:27 PM EDT

Their primary problem I would think would be persuading their customers that they'll still be around a year from now."

When company fails one of the possible outcomes is that another company takes over the product line and supports it in order to retain the failing company's customers. A recent example of this is Compaq being taken over by HP.

SCO v Novell throws a cloud over the possibility of some other company taking over the existing SCO client base. The dispute over who owns Unix and the potential money liabilities that SCO faces make it very unlikely that if SCO fails another company could take over supporting SCO customers or even want to attempt to do so.

----------------------
Steve Stites

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SCO Executives join Gov. Huntsman on China Trade mission
Authored by: stats_for_all on Thursday, September 14 2006 @ 01:10 PM EDT
Utah Gov. Huntsman invites SCOX executives to China on a trademission.

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Time for more "investments"?
Authored by: Anonymous on Thursday, September 14 2006 @ 01:27 PM EDT
Every time SCO appears to be on the verge of bankruptcy, it seems someone
manages to mysteriously find secret investors to give SCO another 20-30 Million
USD to last another year. I think so is almost out of money again, aren't they?

So, how are *coughmicrosoftcough,coughsuncough* going to keep them funded for
another year?

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SCO Files Its 10Q Sob Story - Updated
Authored by: Yossarian on Thursday, September 14 2006 @ 01:57 PM EDT
> 8 1/2 million dollars in about two years just
> for experts and consultants.

IMO the issue is the mountian of code that IBM had to give
SCO. This mountain is way too big for SCO to go over it in
a reasonable time with its employees. SCO has to hire good
consultants who may be able to find the niddle in the hay
stack, assuming there is a niddle in the hay stack.

SCO seems like a rabbit that hit a tar-baby. IBM made the
point of "We gave SCO all the code, so SCO could be
specific". So SCO hired all the experts it could find
hoping that they may, some day, some how, some where,
make some "file, version, line," claims.

And it is not cheap.

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The primary problem is how SCO treats customers.
Authored by: Anonymous on Thursday, September 14 2006 @ 03:47 PM EDT
PJ Wrote: Their primary problem I would think would be persuading their customers that they'll still be around a year from now.

That's not even the primary problem. The biggest thing that scares us away from doing business with SCO is their habit of suing partners and customers.

Their track record shows that you have a better chance of being sued from them if you're their partner than if you're a RedHat or IBM partner. (Didn't Darl even have some cute quote to that effect too, that they like to use their contracts against their customers or something like that?)

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Novell's claims
Authored by: Anonymous on Thursday, September 14 2006 @ 03:54 PM EDT
> Novell’s claim of UNIX copyright ownership

I am not sure that Novell has ever claimed that it does own copyrights on Unix,
all that it has said it that SCO did not, and SCOG does not, own copyright to
SVR4 and Unix code because they were excluded in the APA with SCO. Any reference
that they _may_ transfer copyrights and trademarks if asked is limited to those
that Novell did actually own (if any) and then only if it was required for the
business.

In fact I doubt that Novell even wants to address the issue of what copyrights
exist and are protectable in any of the Unix code. They settled with BSD in a
closed agreement, and have not made any claims to owning any copyright in the
code, because no good will ever come about agueing over it. The only conclusion
would be that there is very little that could be protected, as the court will
undoubtedly eventually find when IBM presents the reasons for dismissing the
remaining 98 or so items (such as: the code came from BSD).

There are, of course, copyrights which do exist and were transferred from Novell
to SCO and to SCOG, but these were not for code but were for 'collections' such
as Unixware and for manuals and other publications.

Caldera/SCOG made a mistake in reading the sale agreement with SCO. It alegedly
stated 'all copyrights' (meaning all that SCO did own) and the list included an
entry 'Unix System Software' which was a book. Darl thought that this meant
they now owned copyright on every single line in the Unix source code and
started lawsuits based on his misunderstanding of history and of what the
contracts clearly stated.

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  • Novell's claims - Authored by: elrond_2003 on Thursday, September 14 2006 @ 04:03 PM EDT
    • Novell's claims - Authored by: Anonymous on Thursday, September 14 2006 @ 04:29 PM EDT
      • Only if - Authored by: Anonymous on Thursday, September 14 2006 @ 04:47 PM EDT
      • Novell's claims - Authored by: Anonymous on Thursday, September 14 2006 @ 09:30 PM EDT
  • Novell's claims - Authored by: Yossarian on Thursday, September 14 2006 @ 06:06 PM EDT
  • Novell's claims - Authored by: Anonymous on Thursday, September 14 2006 @ 11:25 PM EDT
    • Novell's claims - Authored by: Anonymous on Saturday, September 16 2006 @ 04:55 PM EDT
      • Novell's claims - Authored by: PJ on Saturday, September 16 2006 @ 05:23 PM EDT
        • Novell's claims - Authored by: Anonymous on Saturday, September 16 2006 @ 06:59 PM EDT
It's not quantifiable because....
Authored by: darkonc on Thursday, September 14 2006 @ 05:18 PM EDT
"Any realistic estimate I made seems to result in a bankruptcy singularity."

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

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... and we believe and allege
Authored by: Mp3rocks on Thursday, September 14 2006 @ 06:10 PM EDT
Apparently allegation is possible without belief, in SCO's book. It would be
interesting to know which if any of SCO's allegations they did not believe.

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"SCO litigation" ???
Authored by: gfim on Thursday, September 14 2006 @ 07:54 PM EDT
They mention "SCO litigation" a number of times. Surely, from their
point of view, it's the "IBM litigation" (or Novell, or Redhat,
or...). Perhaps they copied and pasted from somewhere. Or perhaps they're
planning on suing themselves!

---
Graham

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Your stock phrases are really pissing me off now.
Authored by: Anonymous on Friday, September 15 2006 @ 04:06 AM EDT
<em>Joke, joke</em>.

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SCO Files Its 10Q Sob Story - Updated IF THEY LOSE TO IBM
Authored by: Anonymous on Friday, September 15 2006 @ 02:15 PM EDT
It's not just IBM they need to worry about losing to. If Novell gets it's pound
of
flesh for the Sun and MS license, that will probably wipe them out all by
itself.
Remember the percentage of income from the Unix licensing business is a
significant part of their revenue, and most of that still needs to go to Novell.

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SCO Files Its 10Q Sob Story - Updated
Authored by: Anonymous on Sunday, September 17 2006 @ 03:28 PM EDT
A couple of days ago someone came to our company to interview for a systems
administrator position. His current employer was SCO and we've simply turned
down because he was currently employed by SCO.

I had the chance to ask him about what he thinks about this trial and he said it
was "simply disgusting". It's interesting that SCO employees are
seeking out and even if my company decided not to consider his
application/interview for political reasons (we're a *big* company and 90% of
our servers are running linux) it's also interesting to note that SCO employees
are having a hard time finding jobs after what SCO has been doing; I personally
consider that this is somewhat unfair.

I am unsure if other SCO employees feel the same about their current employer,
this employee (the one we've interviewed) clearly couldn't take it anymore. I
kinda feel sorry for him, especially because he's been at SCO for almost a
decade .

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