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SCO Loses More Money - Darl: "It's not a real pretty picture."
Wednesday, January 17 2007 @ 04:27 PM EST

SCO has filed with the SEC a press release as an exhibit, and it's another sad story about more money lost, despite legal expenses going down: "The decrease in revenue was primarily attributable to continued competitive pressures on the Company’s UNIX products and services."

Update: Layoffs confirmed, sort of. More specific information is promised when SCO files with the SEC in a few weeks. But SCO has now 45-50 employees working in Utah, 142 total. As to whether SCO is going bankrupt, as asserted by Novell in court filings, SCO CEO refused to officially confirm or deny. As an *individual*, CEO Darl McBride said that isn't what keeps him up at night worrying. He stays awake thinking about all the great technology they are developing. Novell's assertions "border on the ridiculous", he stated. But SCO's current assets are less than Novell says it is owed, down 19% from the previous Q4. From the horse's mouth: "With respect to the negativity, some of it is warranted. Let's face it, it's not are a real pretty picture," McBride said in reference to SCO dismal financial performance.

Update2: Dan Goodin of The Register got a remarkably clear picture from the conference call, and he presents it in his article, "SCO punts on Novell bankruptcy claim":

Novell last week said in a legal filing that SCO is on the verge of bankruptcy, not just in the event that SCO is ordered to pay $26m in contested licensing fees, but "because of its own financial missteps." SCO last week responded by calling the claim FUD and a spokesman promised to report "all aspects of our business" during today's conference call.

Proving there are different interpretations of "all aspects," SCO never addressed the bankruptcy issue head on. Asked today whether insolvency was in fact imminent, SCO CEO Darl McBride would say only, "We're comfortable with our cash position." He then referred us to a court document SCO filed last week that he promised would more thoroughly respond to Novell's contention.

We checked but couldn't find a single sentence that addressed the claim that SCO's own missteps made bankruptcy imminent....What remains clear is that SCO's losses have snowballed in recent quarters.

He links to SCO's site, but for those that would rather not visit there, we have the document here, along with all the other SCO v. Novell and SCO v. IBM filings. It's all here. Bob Mims has more.

Here is how SCO sum it up:

The SCO Group, Inc. (Nasdaq: SCOX), a leading provider of UNIX® software technology and mobile services, today reported results for its fourth quarter and fiscal year ended October 31, 2006.

Revenue for the fourth quarter of fiscal year 2006 was $7,349,000as compared to $8,528,000for the comparable quarter of the prior year. The net loss for the fourth quarter of fiscal year 2006 was $(3,743,000), or $(0.18) per diluted common share, as compared to a net loss of $(3,431,000), or $(0.19) per diluted common share, for the comparable quarter of the prior year. The decrease in revenue was primarily attributable to continued competitive pressures on the Company’s UNIX products and services.

“Even though competition is strong and continues to impact our revenue and operating results, we are continuing to develop and promote our UNIX solutions and mobile services strategy, as we believe that the market, as well as the benefits to our customers and partners, are significant,” said Darl McBride, president and CEO of The SCO Group. “During the fourth quarter we made adjustments to our operating model and eliminated certain costs. We believe these cost adjustments will allow the UNIX business to return to generating positive cash flow for the 2007 fiscal year. The Company continues to make progress in the development of its Me Inc. mobile services platform and applications. We remain committed to our UNIX business, introducing new mobile services to the marketplace and defending our intellectual property through the legal system.”

Revenue for the year ended October 31, 2006 was $29,239,000 as compared to $36,004,000 for the year ended October 31, 2005. The net loss for the year ended October 31, 2006 was $(16,598,000), or $(0.80) per diluted common share, as compared to a net loss of $(10,726,000), or $(0.60) per diluted common share, for the year ended October 31, 2005.

Legal and other expenses incurred in connection with the Company’s litigation were $2,220,000 for the fourth quarter of fiscal year 2006, which was down from costs of $3,380,000 for the comparable quarter of the prior year and down from costs of $2,315,000 for the third quarter of fiscal year 2006. Because of the unique and unpredictable nature of this litigation, the occurrence and timing of litigation-related expenses is difficult to predict, and will be difficult to predict in the future. While we expect to continue to incur legal costs and expenses related to our ongoing litigation during the 2007 fiscal year, our expectation is that those costs and expenses will be less than they were for the 2006 fiscal year.

Cash and cash equivalents, available-for-sale marketable securities and restricted cash to be used for certain legal expenses totaled $12,664,000 as of October 31, 2006, compared to $13,312,000 as of October 31, 2005.

The Company’s Business

During the fourth quarter of fiscal year 2006, the Company introduced an upgraded version of SCOoffice Server designed for SCO OpenServer 6 and UnixWare 7.1.4. The Company also began shipping SCO HA Clusters, a high availability solution for SCO OpenServer 6 customers that assures the constant availability of applications and data to the customer in the event of a hardware or software failure.

During the past year, the Company has developed a number of Me Inc. mobile services for use on a variety of industry smart phones for business and personal use. These mobile services are made possible through the Me Inc. Mobility Server, which is the back-end server technology based on the Company’s UNIX technology, that does much of the heavy lifting to make mobile phones substantially more powerful and useful. Combining these mobile services with the Company’s Me Inc. Mobility Server gives users a richer mobile experience and greater mobile capabilities than they would otherwise have.

During the quarter, the Company announced that it had entered into a strategic business partnership to develop, market, merchandise, and support a suite of Day-Timers branded mobile solutions for business and personal productivity. The Company is continuing development on the Day-Timers solution, and expects to begin shipping the solution during the second calendar quarter of 2007.

Conference Call

As previously announced, The SCO Group will host a conference call at 5:00 p.m. EST today, January 17, 2007, to discuss the fourth quarter and fiscal year 2006 results. To participate in the teleconference, please call toll free 1-888-343-2169 or use the toll number 1-212-346-6594; confirmation code: 21322180, approximately ten minutes prior to the time stated above. A listen-only Webcast of the call will be broadcast live with a replay available the following day. The Webcast and replay may be accessed from http://ir.sco.com/events.cfm.


  


SCO Loses More Money - Darl: "It's not a real pretty picture." | 392 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Will it lead to bankruptcy even without 26m payment to Novell? (n/t)
Authored by: Anonymous on Wednesday, January 17 2007 @ 04:47 PM EST
.

[ Reply to This | # ]

OT here
Authored by: SpaceLifeForm on Wednesday, January 17 2007 @ 04:48 PM EST
Please make any links clickable.


---

You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

Corrections here please
Authored by: tiger99 on Wednesday, January 17 2007 @ 04:56 PM EST
If needed, to assist PJ

[ Reply to This | # ]

Is the end near, does bankruptcy loom?
Authored by: Chris Lingard on Wednesday, January 17 2007 @ 05:04 PM EST

They show cash reserves of $12,664,000, but they have bundled real cash with reserved cash.

This letter is not audited; in previous audited accounts there has been at least $6 million cash held in reserve, because it is already owed to people.

So their real cash reserves are less that half that shown, and only enough to barely survive next quarter.

[ Reply to This | # ]

GROBR
Authored by: SilverWave on Wednesday, January 17 2007 @ 05:10 PM EST
Good Riddance of Bad Rubbish

:)

---
Ubuntu is like a breath of fresh air after the smog.
Free yourself
Y1 Use foss apps as replacements ff tb ooo
Y2 Ubuntu dual boot
Ubuntu user as of 181206

[ Reply to This | # ]

  • GROBR - Authored by: wtansill on Wednesday, January 17 2007 @ 10:52 PM EST
    • GROBR - Authored by: Anonymous on Thursday, January 18 2007 @ 12:34 AM EST
  • GROBR - Authored by: Anonymous on Thursday, January 18 2007 @ 12:20 AM EST
Conference call - 24 staff gone
Authored by: tiger99 on Wednesday, January 17 2007 @ 05:22 PM EST
All Petrovsky just asked about the head count which is down to 142 from 166.

[ Reply to This | # ]

SCO Loses More Money
Authored by: Anonymous on Wednesday, January 17 2007 @ 05:26 PM EST
some quick calculations:

(current assets) - (current liabilities) = 7,144,000

burn rate = 3,960,000 per quater (up from 3,479,000 last year)

at this rate they have about 2 quaters left to live, unless they get another
cash infusion.

[ Reply to This | # ]

Daytimer?
Authored by: tiger99 on Wednesday, January 17 2007 @ 05:39 PM EST
Some new product coming from a partnership, but maybe not till mid-year, which seems to be about the time they go bust.....

:-)

Even better, a lady questioner got in one about Novell saying that they are going bankrput. Darl is rather dodging the issue.....

[ Reply to This | # ]

M O'G 'Tired'?
Authored by: Anonymous on Wednesday, January 17 2007 @ 05:42 PM EST
I have just heard Maureen O'Gara ask a couple of questions, in my opinion she
didn't sound particularly vibrant, she misunderstood some info and must have had
a dry throat because I heard her clink a glass and take a sip.

Perhaps she has a sore throat but did anyone else get the impression that she
may have been calling from a timezone where it's late at night?

[ Reply to This | # ]

You have to give Darl credit for one thing.
Authored by: Anonymous on Wednesday, January 17 2007 @ 05:42 PM EST

He has learned to keep his mouth shut.
He still has a bit to go..
but the old "MIT deep dive" Darl has been 'controlled'..

Still wouldn't trust him for a second... he still hasn't answered a straight
question with a straight answer...

but at least his tongue is better managed

[ Reply to This | # ]

BSF
Authored by: tiger99 on Wednesday, January 17 2007 @ 05:45 PM EST
Confirmed that they have been working without payment for 3 quarters now. Couldn't happen to a nicer law firm....

But it sounds like the Novell arbitration is costing a bit!

[ Reply to This | # ]

Ouch!
Authored by: tiger99 on Wednesday, January 17 2007 @ 05:50 PM EST
Someone slipped in a question about how many of the remaining 111 claims against
IBM that they need to win, in order to regard it as a win. Darl waffled a bit,
and of course dodged the issue...... But I don't think he is enjoying it at all.

[ Reply to This | # ]

Well, that is all over, till next quarter....
Authored by: tiger99 on Wednesday, January 17 2007 @ 06:02 PM EST
As usual, Darl is suggesting that the next year will be better, with all the new products coming along. Yet Me, Inc is only bringing in tiny amounts of revenue.

Next quarter, I predict that cash will be down by about $3 or $4M, maybe more, with only one quarter's funding left, and he will say exactly the same......

The guy amazes me.

[ Reply to This | # ]

NT 10-K or 10-K ? I'm thinking NT...
Authored by: roboteye on Wednesday, January 17 2007 @ 06:46 PM EST
for the past few years the 4th quarter CC also marked a 10-K submission to the
SEC. No 10-K this time; last time it wasn't submitted was due to an auditor's
spat (changed over to another auditor).

I wonder if there's a tad resistance to signing off tSCOg as a "going
concern". [I'm concerned it's still going]

[ Reply to This | # ]

What's the business case?
Authored by: UglyGreenTroll on Wednesday, January 17 2007 @ 07:12 PM EST
$3.4 million in marketing costs.
$2.3 million in R&D costs.

This is just for the quarter.

Who in their right mind would develop and market new products under the SCO
label? The name is toxic. One may as well try to sell food under the brand
"E Coli Industries."

Spending money on the above makes no business sense for SCO (although it may
make legal sense). It makes me wonder what McBride is thinking. Is he delusional
in addition to his other problems?

[ Reply to This | # ]

I'm missing bits..
Authored by: Peter Baker on Wednesday, January 17 2007 @ 07:38 PM EST
Maybe I'm misunderstanding things, but I would have expected some reference to
the current license revenue debate with Novell. After all, that creates a
potential to basically nuke the company finances there and then so I would
imaging it's relevant data to an investor.

And, of course, you can't fail to spot the statement on the
"unpredicatable" nature of the lawsuits. Methinks there is a vastly
increasing predictability about both of them, and it's ain't looking pretty for
SCO as far as I can see (IMHO, IANAL etc). But I assume that would be
conveniently considered a forward looking statement..


---

= PB =

"Only a man can suffer ignorance and smile" - Sting
(Englishman in New York)

[ Reply to This | # ]

Darl is kidding himself
Authored by: Anonymous on Wednesday, January 17 2007 @ 08:04 PM EST
or very delusional.
He stays awake thinking about all the great technology they are developing.

Wishful thinking is more like it.

[ Reply to This | # ]

SCO Loses More Ownership
Authored by: Anonymous on Wednesday, January 17 2007 @ 08:04 PM EST
>>>
a leading provider of UNIX® software technology and mobile
services
<<<

When did SCO stop claiming ownership of all software?

[ Reply to This | # ]

SCO Loses More Money - Darl: "It's not a real pretty picture."
Authored by: Anonymous on Wednesday, January 17 2007 @ 08:20 PM EST
Hmm. SCO's equity as of Oct. 31 almost exactly equals their market cap today.
Getting pretty close to the point where the investors could recover more cash by
liquidating the company than by selling stock.

[ Reply to This | # ]

SCO Loses More Money - Darl: "It's not a real pretty picture."
Authored by: Anonymous on Wednesday, January 17 2007 @ 08:22 PM EST
They still claim $116,000 in SCOSource revenue in 2006. Who are the suckers who
are still paying??

[ Reply to This | # ]

SCO Loses More Money - Darl: "It's not a real pretty picture."
Authored by: Anonymous on Wednesday, January 17 2007 @ 08:24 PM EST
They still claim $116,000 in SCOSource revenue in 2006. Who are the suckers who
are still paying??

[ Reply to This | # ]

Darl may be telling the truth
Authored by: Yossarian on Wednesday, January 17 2007 @ 08:34 PM EST
>As an *individual*, CEO Darl McBride said that
>isn't what keeps him up at night worrying.

I think that Darl is not all that worry about losing all the
stock holders money. What really worries him is how to stay
out of jail while IBM lawyers will check everything he did
and say in the last 5 years.

[ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Anonymous on Wednesday, January 17 2007 @ 08:55 PM EST

    My favorite part was when Darl said (paraphrasing) Over the past few years I've learned that people can say pretty much anything in these court filings

    ...who would know better ?

    [ Reply to This | # ]

    Now Listening To Bizarre Love Triangle By New Order
    Authored by: Anonymous on Wednesday, January 17 2007 @ 10:16 PM EST
    Hey, everybody!

    "There's no sense in telling me,
    "'The wisdom of a fool won't set you free.'
    "But that's the way that it goes
    "And it's what nobody knows
    "And everyday my confusion grows."

    I believe the best metaphor that sums up the whole SCO case is "paper
    tiger."

    I love his suggestion that it's not the company's situation that keeps him up,
    but the new product launches. Hyperbole needs lighter reality to keep the
    wheels from breaking off the bandwagon.

    Considering no one is investing any money or hope in SCO, and the PIPE Fairy has
    gone AWOL, I get the impression that Darl knows full well he's been left holding
    the diaper. All those dollar signs are history. It's not just about kiting the
    stock. He needs to invest the money because his career is over--no one will
    ever hire him again. His name has become a punchline. Losing money is one
    thing. Trying to buck the system, destroying a company, and going down on the
    bad side of case law history has a tendency to color the resume a bit.

    I haven't worked in a Douglas Adams reference in a while, so here's one--unless
    he's going to argue that his statements are truth because they are more
    beautiful and truth is beauty, he might as well admit he's sunk.

    Dobre utka,
    The Blue Sky Ranger

    [ Reply to This | # ]

    Novell likely to file again to rush thru a protective trust?
    Authored by: Anonymous on Wednesday, January 17 2007 @ 10:28 PM EST
    How many hours before Novell files again to get the loose change left laying
    around on Darl's desk locked away in a trust?

    Charles from Oz

    [ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Anonymous on Wednesday, January 17 2007 @ 11:44 PM EST
    I can just imagine Darl being at the control of an aircraft - A big one, Slowly
    morphing into a smaller plane as bits break off, whilst the "Terrain!!
    Terrain!! PULL UP!! PULL UP!! WHOOP WHOOP WHOOP!

    And all he can say is "It's not a pretty picture"... "But I don't
    loose sleep over it".

    [ Reply to This | # ]

    Why not have IBM buy them now.
    Authored by: Anonymous on Thursday, January 18 2007 @ 02:27 AM EST
    We know that as of today, SCO's market caps is 23.4 million ($1.11 x outstanding
    shares). My question is, why does IBM not just buy them outright at this point?
    They've got to know that if they run this through its due course, they're not
    getting their lawyers fees back from SCO. So why not just buy the company after
    negotiating with Novell and other lawsuit interests, and sell whatever is left.
    Cut the loss. Or have IBM and Novell mutally buy them and divvy it up. It ends
    the case. They cut their losses NOW and everyone gets on with life. Of course,
    they'd still get to fire Darl & co and perhaps turn over their shady
    dealings to the SEC to watch them burn.
    At such small numbers, doesn't it really make sense at this point? It would make
    them privy to all the info about their dealings with MSFT and Baystar. I'd think
    what they'd get would be a bargain at this point in the game, especially
    considering they could really get MSFT caught up in it too.

    [ Reply to This | # ]

    Surely Novell can now go for the SCOX throat
    Authored by: lannet on Thursday, January 18 2007 @ 05:34 AM EST
    I have no idea how bankruptcy laws work in the US, but surely Novell now have
    sufficient evidence to try to foreclose on SCOX and force them into bankruptcy
    or administration.


    ---
    When you want a computer system that works, just choose Linux.
    When you want a computer system that works, just, choose Microsoft.

    [ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Anonymous on Thursday, January 18 2007 @ 05:39 AM EST
    Gack! or even "to it's doom"

    k

    [ Reply to This | # ]

    Great quote from the 8-K
    Authored by: chris_bloke on Thursday, January 18 2007 @ 05:53 AM EST

    Here's a ripper from the 8K on their website:

    Because of the unique and unpredictable nature of this litigation, the occurrence and timing of litigation-related expenses is difficult to predict, and will be difficult to predict in the future.

    I think "unique and unpredictable" is it down to a T, but they only have themselves to blame!

    [ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Steve Martin on Thursday, January 18 2007 @ 07:48 AM EST

    Mims re: the conference call:

    "We're very focused and determined to turn this thing around to the green [ink] rather than the red," McBride said in a teleconference Wednesday afternoon.
    My attention was snagged by this apparently Freudian slip; doesn't Mr. McBride know that accountants typically use black ink for positive results, rather than green ink?

    ;)

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

    [ Reply to This | # ]

    "We're comfortable with our cash position."
    Authored by: Sunny Penguin on Thursday, January 18 2007 @ 08:04 AM EST
    Notice that he said nothing of The SCO Group's cash position, only our cash position.

    Darl, Who's your friends?

    Where did they get the cash?

    ---
    If you love your bike, let it go.
    If it comes back, you high sided.....

    [ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Anonymous on Thursday, January 18 2007 @ 09:17 AM EST
    everything would be great if novell didn't do the deal with microsoft.

    I guess since sco wasn't working so good for microsoft they had to find another
    sucker to get revenue from linux and meanwhile try to destroy it while ballmer
    spewing whatever he wants.

    [ Reply to This | # ]

    SCO Loses More Money - Darl: "It's not a real pretty picture."
    Authored by: Anonymous on Thursday, January 18 2007 @ 10:22 AM EST
    "He stays awake thinking about all the great technology they are
    developing."

    Indeed, thanks to Darl's great contribution to technology SCO has become the
    leading producer of "misinformation" products. Companies who wish to
    game our legal system should seriously consider Darl's great technology.

    P.L.

    [ Reply to This | # ]

    PJ, the link to IBM & SUN top UNIX is wrong!
    Authored by: Anonymous on Thursday, January 18 2007 @ 11:16 AM EST
    The correct link is Vendors Jostle in Unix Preference Survey.

    Here is an intersting bit from the article:

    For example, when asked who would be the dominant player in the Unix market five years from now, 42 percent said IBM, 33 percent said Sun, and 23 percent went with HP.

    Funny, these numbers add up to 98% and SCO was not even mentioned anywhere. It clearly contradicts this claim:

    About The SCO Group
    The SCO Group (NASDAQ: SCOX) is a leading provider of UNIX software technology...

    :=)

    [ Reply to This | # ]

    How much longer is SCO really going to last?
    Authored by: Anonymous on Thursday, January 18 2007 @ 04:17 PM EST
    They claim to have $12 million in cash, but are burning about $3 million a
    quarter in losses. SCO says their expenses will be less in 2007, including lower
    legal fees, but sales are dropping at an alarming rate. One wonders if we are
    within one year of either of the following:

    1) Official SCO bankruptcy
    2) SCO killing it's sales and development staff to trim expenses to a point
    where they can last another year or two without spending much. Of course if they
    do this, sales may plummet. That would be a huge negative statement about the
    future viability of their UNIX OS or their intention to keep supporting it and
    fixing issues.

    [ Reply to This | # ]
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