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SCO Releases 3Q Results
Wednesday, September 07 2005 @ 05:44 PM EDT

Here is SCO's press release about their third quarter results. The second paragraph says it all:
Revenue for the third quarter of fiscal year 2005 was $9,353,000 as compared to $11,205,000 for the comparable quarter of the prior year. The decrease in revenue in the third quarter of fiscal year 2005 from the comparable quarter of the prior year was primarily due to continued competitive pressures on the Company's UNIX products and services and a decrease in SCOsource licensing revenue.

Oh, and this section of the forward-looking statements disclaimer:

We wish to advise readers that a number of important factors could cause actual results to differ materially from historical results or those anticipated in such forward-looking statements. These factors include, but are not limited to, continued competitive pressure on its operating system products which could impact the profitability of the UNIX business, unforeseen legal costs related to our litigation, our inability to develop new products and services, and our inability to see our litigation through to its conclusion.

Of course, Darl says they remain "committed to pursuing our legal strategy in the courtroom and look forward to presenting our case in February 2007."

Investor's Business Daily sums up the quarter like this:

SCO Group swings to quarterly loss - SAN FRANCISCO (MarketWatch) -- SCO Group(SCOX)after Wednesday's closing bell reported a third-quarter net loss of $2.37 million, or 13 cents a share. In the same period a year ago, the company reported earnings of $7.42 million, or 38 cents a share. Revenue at the Linden, Utah-based provider of UNIX software technology fell to $9.35 million from $11.2 million last year.

Darl also mentions some reviews of OpenServer 6. If you would like to see a review, check out Tom Henderson's on Techworld.

***********************

LINDON, Utah, Sept. 7 /PRNewswire-FirstCall/ -- The SCO Group, Inc. (Nasdaq: SCOX - News), a leading provider of UNIX® software technology for distributed, embedded and network-based systems, today reported results for its fiscal third quarter ended July 31, 2005.

Revenue for the third quarter of fiscal year 2005 was $9,353,000 as compared to $11,205,000 for the comparable quarter of the prior year. The decrease in revenue in the third quarter of fiscal year 2005 from the comparable quarter of the prior year was primarily due to continued competitive pressures on the Company's UNIX products and services and a decrease in SCOsource licensing revenue.

The net loss attributable to common stockholders for the third quarter of fiscal year 2005 was $(2,372,000), or $(0.13) per diluted common share, as compared to net income available to common stockholders of $7,501,000 or $0.38 per diluted common share for the comparable quarter of the prior year. Included in the net income available to common stockholders for the third quarter of fiscal year 2004 was a one-time contribution of capital of $14,924,000 recorded as a dividend. Exclusive of this dividend, the net loss for the third quarter of fiscal year 2004 was $(7,423,000).

"The third quarter was a productive quarter for SCO," said Darl McBride, President and CEO of The SCO Group. "Our UNIX business operated profitably for the third consecutive quarter and we launched SCO OpenServer 6 which has received many favorable reviews and is showing traction with customers. We also recently concluded our annual SCO Forum event in Las Vegas and received positive feedback on our UNIX business from the partners, resellers and customers who attended the event."

McBride concluded, "Finally, we remain committed to pursuing our legal strategy in the courtroom and look forward to presenting our case in February 2007."

Revenue for the nine months ended July 31, 2005 was $27,476,000 as compared to $32,734,000 for the nine months ended July 31, 2004. The net loss attributable to common stockholders for the first nine months of fiscal year 2005 was $(7,295,000), or $(0.41) per diluted common share, as compared to a net loss attributable to common stockholders of $(9,711,000), or $(0.67) per diluted common share for the first nine months of fiscal year 2004.

Cash and cash equivalents and available-for-sale securities were $12,602,000 as of July 31, 2005. In addition, $3,579,000 is held in an escrow account and is classified as a component of restricted cash as of July 31, 2005, to be used to pay for certain expenses associated with our litigation.

UNIX Business

The Company released SCO OpenServer 6 on June 22, 2005 at an event for SCO's software and hardware partners, customers, and members of the media and analyst community in New York City at Yankee Stadium.

SCO OpenServer 6 has been the subject of numerous positive reviews by analysts and the media including eWeek, Networkworld and UnixReview. SCO resellers have received a high level of interest in this upgrade from their customers due to the product's increased performance, support for more powerful hardware and a broader array of applications as well as significant security and stability enhancements.

The Company's UNIX business was profitable during the third quarter. This marks the third consecutive quarter of profitability for the UNIX business, and SCO's executive team remains committed to running a profitable UNIX business in future quarters.

Conference Call

As previously announced, The SCO Group will host a conference call at 5:00 p.m. EDT today, September 7, 2005 to discuss its third quarter results. To participate in the teleconference, please call toll free 877-502-9276 or use the toll number 913-981-5591; confirmation code: 7700475, approximately five minutes prior to the time stated above. A listen-only Web cast of the call will be broadcast live with a replay available the following day. The Web cast and replay may be accessed from http://ir.sco.com/medialist.cfm.

Forward-Looking Statements

The statements contained in this press release regarding (i) our legal strategy and (ii) the future profitability of our UNIX business that are not historical facts are forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to risks and uncertainties. We wish to advise readers that a number of important factors could cause actual results to differ materially from historical results or those anticipated in such forward-looking statements. These factors include, but are not limited to, continued competitive pressure on its operating system products which could impact the profitability of the UNIX business, unforeseen legal costs related to our litigation, our inability to develop new products and services, and our inability to see our litigation through to its conclusion. These and other factors could cause actual results to differ materially from those anticipated are discussed in more detail in the Company's filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date on which such statements are made, and SCO undertakes no obligation to update such statements to reflect events or circumstances arising after such date.

About SCO

The SCO Group, Inc. (Nasdaq: SCOX - News) is a leading provider of UNIX software technology for distributed, embedded and network-based systems, offering SCO OpenServer for small to medium business and UnixWare for enterprise applications and digital network services. SCO's highly innovative and reliable solutions help millions of customers to grow their businesses every day, from SCO OpenServer on main street to UnixWare on Wall Street, and beyond. SCO owns the core UNIX operating system originally developed by AT&T/Bell Labs and is the exclusive licensor to UNIX-based system software providers.

Headquartered in Lindon, Utah, SCO has a worldwide network of thousands of resellers and developers. SCO Global Services provides reliable localized support and services to partners and customers. For more information on SCO products and services, visit http://www.sco.com.

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. All other brand or product names are or may be trademarks of, and are used to identify products or services of, their respective owners.



                  Condensed Consolidated Balance Sheets Data
                          (unaudited, in thousands)

                                                      July 31,     October 31,
                                                        2005          2004
     Assets:
       Cash and cash equivalents                       $6,526        $12,693
       Restricted cash                                  4,004          8,283
       Available-for-sale securities                    6,076         18,756
       Accounts receivable, net                         4,947          6,638
       Other current assets                             2,376          1,870
         Total current assets                          23,929         48,240
       Property and equipment, net                        578            649
       Intangibles, net                                 3,383          5,413
       Other assets                                     1,118          1,098
         Total assets                                 $29,008        $55,400


     Liabilities:
       Accounts payable                                $1,337         $7,854
       Accrued payroll and accrued expenses             5,449          7,224
       Accrued compensation to law firms                   --          7,956
       Deferred revenue                                 4,021          4,877
       Other current liabilities                        2,059          4,916
         Total current liabilities                     12,866         32,827
       Long-term liabilities                              340            343
       Common stock subject to rescission               1,104            528
       Stockholders' equity                            14,698         21,702
         Total liabilities and stockholders' equity   $29,008        $55,400



             Condensed Consolidated Statements of Operations Data
               (unaudited, in thousands, except per share data)

                                 Three Months Ended        Nine Months Ended
                                      July 31,                  July 31,
                                 2005         2004         2005         2004

     Products revenue           $7,953       $8,929      $23,095      $27,056
     SCOsource licensing
      revenue                       32          678          132          709
     Services revenue            1,368        1,598        4,249        4,969
       Total revenue             9,353       11,205       27,476       32,734
     Cost of products revenue      695          741        1,902        2,364
     Cost of SCOsource
      licensing revenue          3,085        7,396        9,467       15,486
     Cost of services revenue      700          878        2,195        3,273
       Total cost of revenue     4,480        9,015       13,564       21,123
       Gross margin              4,873        2,190       13,912       11,611
     Operating expenses:
       Sales and marketing       2,935        4,233        8,835       13,952
       Research and
        development              1,940        2,592        6,137        8,167
       General and
        administrative           1,647        1,889        5,446        5,793
       Loss on impairment of
        long-lived assets           --           --           --        2,139
       Severance and
        exit costs                  --           --           --          682
       Amortization of
        intangibles                593          593        1,779        1,973
       Stock-based compensation     --          270           22          868
         Total operating
          expenses               7,115        9,577       22,219       33,574
     Loss from operations       (2,242)      (7,387)      (8,307)     (21,963)
     Equity in income (loss)
      of affiliate                 (19)          41           51          115
     Other income
      (expense), net               (27)          99        1,282        6,284
     Loss before income taxes   (2,288)      (7,247)      (6,974)     (15,564)
     Provision for
      income taxes                 (84)        (176)        (321)      (1,270)
     Net loss                   (2,372)      (7,423)      (7,295)     (16,834)
     Contribution from
      (dividends on)
      convertible preferred
      stock                         --       14,924           --        7,123
     Net income available
      (loss applicable) to
      common stockholders      $(2,372)      $7,501      $(7,295)     $(9,711)
     Basic net income (loss)
      per common share          $(0.13)       $0.49       $(0.41)      $(0.67)
     Diluted net income
      (loss) per
      common share              $(0.13)       $0.38       $(0.41)      $(0.67)
     Weighted average basic
      common shares
      outstanding               17,993       15,242       17,885       14,389
     Weighted average
      diluted common shares
      outstanding               17,993       19,912       17,885       14,389



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