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Nasdaq Sends SCO Delisting Notice
Thursday, February 17 2005 @ 10:24 AM EST

Nasdaq noticed that SCO failed to timely file its 10K, and it has sent them a delisting notice. This is a notice of potential delisting, as SCO's press release urgently lets us know.

The Dow Jones Newswires carried the news. Bob Mims' article in the Salt Lake Tribune has a quote from Laura Didio, that SCO expert, and Blake Stowell, who always tells us the truth, the whole truth and nothing but the truth:

  "'It is clearly a red light,' said Laura DiDio, an analyst at The Yankee Group in Boston. 'If I were an investor, I would be very concerned.'

"In a brief statement issued Wednesday, SCO spokesman Blake Stowell confirmed only that the delays came 'because management and the company's independent auditors continue to examine certain matters related to the issuance of shares of the company's common stock pursuant to its equity compensation plans.'

   "SCO plans to file its belated report 'as soon as possible . . . when its analysis is complete.'"

I'd say if investors are only starting to be concerned at this late date, they haven't been paying attention. Not that the stock market makes any sense to me anyhow, so don't go by me. People invest, as far as I can see, based on nothing more logical than a wish and a prayer, or worse.

[Note there are some updated additions to the story since it was first posted this morning.]

Here's a chart for those of you who understand them. All I see is an arrow pointing down. Mims' article includes the what-happens-next info. I gather SCO has a week to request a meeting, and if they fail to do that, they will be delisted in 9 days. Rob Enderle shows up too:

"Rob Enderle, of the Enderle Group, said SCO's filing difficulties are just a glimpse into 'a very complex' situation for the Utah company, which not only faces a tough market for its Unix products and the heavy costs of prolonged litigation against IBM and others, but is dealing with 'turmoil' inside its parent company, The Canopy Group."

I can't help but wonder, is he foreshadowing that SCO's circumstances are now so "complex" they would rather not be listed, in full view of a lot of eyeballs? Time will indicate what is what, and I'd rather not guess. Reuters reports that the company says it will request the meeting. And here's an example showing that such a request can keep a company listed. The US federal securities law involved, as Vnunet's article points out, is Market Place Rule 4310(c)(14). Here are the Nasdaq rules [PDF] Interestingly, it also has this quotation from SCO:

"However, SCO admitted that 'there can be no assurance that the Panel will grant the company's request for continued listing'."

So, SCOXE as of February 18, and then we'll see. Hmm. How about EX-SCO, instead? That has a pleasant ring to it, and it uses the same letters.

Motley Fool has a bleak outlook:

"SCO Group, under the leadership of bellicose CEO Darl McBride, has turned into nothing but a lawsuit and a prayer.

"The Unix biz that was a foundation and might have provided some life support is simply withering away to nothing. Its universally reviled efforts to strong-arm Linux licensing fees out of the rest of the world? It turns out shaking your fist at the code fiends behind the world's biggest cooperative software project makes a lot more enemies than it does money. The latest numbers were awful. Revenues at half of the prior-year quarter's. Losses tripled. Yet McBride had the audacity to claim that 'Fourth Quarter achievements demonstrate continued progress at SCO.'"

The reliable Steven J. Vaughan-Nichols has more intriguing details, from SCO sources:

"'My understanding is that this is related to the company's year 2000 Employee Stock Purchase Program and possibly other items related to the company's compensation program,' an SCO source said. 'We believe that we can get this resolved in short order.'

"Another source close to SCO said that in part the questions about the stock purchase plan had to do with matters related to stock issued to Canopy Group, SCO's parent company."

He has more wisdom from the remarkable Ms. Didio, who says unless they are able to resolve this, things are looking grim for SCO. He also reports on reactions from LinuxWorld:

At LinuxWorld in Boston, as news slowly spread in the morning crowds of SCO's plight, the mood could best be called cheerful.

"'It's about time,' said one midlevel executive from a hardware vendor. 'This has just been getting in everybody's way, and if they go under, maybe we can finally get back to work instead of worrying with this junk.'"

I note that the biographical info on David Boies in this article about a speech he's giving in Florida today never mentions the SCO case. Maybe that is because it also quotes the Dade County Bar Association president as saying, ". . . David consistently demonstrates you can be a strong, highly successful advocate for your clients while at the same time acting with dignity, decency and courtesy toward your opponent." Excuse me, but perhaps I may be permitted to remind us all that Judge Wells' most recent order asked the parties to be nicer to each other, with more "candid cooperation", I think was the phrase, and those of us who have watched this case daily knew exactly what was meant.

I gather the distancing begins. But no one I know will ever forget that Boies Schiller & Flexner represented the SCO Group, or the way they did it, and we didn't find them so very decent, dignified or courteous. I expect SCO to be in paragraph one of all of their obituaries someday. The firm will never get the stench off. Just my opinion, of course. But I bet you can take it to the bank, as they say. I believe BS&F knows what a bank is. It's where you put your money when you decide not to take common stock shares from your client as payment after all.

Here's my favorite quote of the day, however, from a poster on Slashdot:

"Were it not for /. clearing up the FUD, their stock would probably still be flying high on rampant speculation."

: )

Meanwhile, here is SCO's press release about the Nasdaq notice:

The SCO Group, Inc. Receives Notice From Nasdaq Regarding Potential Delisting and Intends to Appeal

LINDON, Utah, Feb 17, 2005 /PRNewswire-FirstCall via COMTEX/ -- The SCO Group, Inc. (Nasdaq: SCOX), announced today that on February 16, 2005, the Company received a notice from the staff of The Nasdaq Stock Market indicating that the Company is subject to potential delisting from The Nasdaq SmallCap Market for failure to comply with Nasdaq's requirements to file its Form 10-K for the fiscal year ended October 31, 2004 in a timely fashion, as required under Market Place Rule 4310(c)(14). Receipt of the notice does not result in immediate delisting of the Company's Common Stock.

Nasdaq stated that, unless the Company requests a hearing on Nasdaq's delisting notice, the Company's securities will be delisted from the Nasdaq SmallCap Market at the opening of business on February 25, 2005. As of the opening of business on February 18, 2005, an "E" will be appended to the end of the Company's trading symbol for its securities. Therefore, commencing on February 18, 2005, the trading symbol for the Company's common stock will be changed from "SCOX" to "SCOXE".

The Company expects to make a request for a hearing with the Nasdaq Listing Qualifications Panel to appeal the Nasdaq staff's determination. This request will stay the delisting pending the hearing and a determination by the Nasdaq Listing Qualifications Panel. There can be no assurance that the Panel will grant the Company's request for continued listing.

The Company has been unable to file its Form 10-K for the fiscal year ended October 31, 2004 because it continues to examine certain matters related to the issuance of shares of the Company's common stock pursuant to its equity compensation plans. The Company is working to resolve these matters as soon as possible and expects to file its Form 10-K upon completion of its analysis.

Forward Looking Statements

This press release contains forward looking statements related to SCO's intention to make a timely request for a hearing with the Nasdaq Listing Qualifications Panel and file the Form 10-K when its analysis is complete. 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 the Company being delisted following an unsuccessful hearing with the Nasdaq Listing Qualifications Panel or the Company failing to file its Form 10-K.

About SCO

The SCO Group (Nasdaq: SCOX) helps millions of customers in more than 82 countries to grow their businesses everyday. Headquartered in Lindon, Utah, SCO has a worldwide network of more than 11,000 resellers and 4,000 developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit SCO, and the associated SCO logo are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX is a registered trademark of The Open Group.

So, their press releases still say they have 4,000 developers. Where?

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