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SCO Reports Net Loss of $4.58 Million - Updated
Wednesday, March 08 2006 @ 05:17 PM EST

The media already are reporting that the SCO Group "reported a net loss of $4.58 million or $0.23 per share for the first quarter, compared to a net loss of $2.96 million or $0.17 per share in the year ago quarter." Revenues declined as well, to $7.34 million from $8.86 million in the prior-year quarter. "Despite our decrease in revenue and our increase in net loss incurred during the first quarter, the UNIX business continued to generate positive cash flow," said Darl McBride, president and CEO of The SCO Group.

The conference call is still in progress.

Call is over. Steven J. Vaughn-Nichols has the details, such as they are.

And for the historians, there is a 13G/A filed with the SEC by Canopy Group on February 15, that I just now noticed, memorializing that Canopy Group owned no SCO stock on December 31, 2005. The filing has zeroes from top to bottom. It's signed by Lewena Noorda, Chairman, Canopy Group.

UPDATE: Ashlee Vance in The Register, "SCO spends $4m to make $30k in Q1":

Say what you will about the SCO Group. The company is a model of consistency.

During its first quarter, SCO turned in lower Unix revenue, fading SCOsource revenues and a statement reminding everyone that it's waiting for the IBM lawsuit to pay out. This ritual of disappointment occurs every three months with little variation on the major themes....

The SCOsource licensing program has proved as unattractive as ever. The company sold just $30,000 worth of IP insurance - down from $70,000 last year.

I have a question: who gave them $30,000 for SCOsource? Anyone know where that comes from?

Here's SCO's press release with the financial details:


The SCO Group to Release First Quarter Financial Results and Host Conference Call After Close of Market on March 8, 2006

The SCO Group, Inc.

(Nasdaq: SCOX), a leading provider of UNIX(R) software technology for distributed, embedded and network-based systems, today reported results for its fiscal first quarter ended January 31, 2006.

Revenue for the first quarter of fiscal year 2006 was $7,343,000 as compared to $8,865,000 for the comparable quarter of the prior year. The decrease in revenue was primarily due to continued competitive pressures on the Company's UNIX products and services.

The net loss for the first quarter of fiscal year 2006 was $(4,581,000), or $(0.23) per diluted common share, as compared to a net loss of $(2,961,000), or $(0.17) per diluted common share, for the comparable quarter of the prior year. Included in the net loss for the first quarter of fiscal year 2006 was $401,000 of stock-based compensation expense, which represented the fair value of equity awards issued by the Company as required upon adopting SFAS No. 123(R). Included in the net loss for the first quarter of fiscal year 2005 was $15,000 of stock-based compensation expense.

"Despite our decrease in revenue and our increase in net loss incurred during the first quarter, the UNIX business continued to generate positive cash flow," said Darl McBride, president and CEO of The SCO Group. "We are pleased with the recently announced general availability of our EdgeClick digital services and believe that with the $10 million in gross proceeds raised in our private placement in November, we can pursue our business operations and see our lawsuit with IBM through to its conclusion."

Cash and cash equivalents and available-for-sale marketable securities were $19,214,000 as of January 31, 2006. In addition, $1,758,000 of cash is held in an escrow account and is classified as a component of restricted cash as of January 31, 2006.

The Company's Business

During the first quarter of fiscal year 2006, the Company completed much of the work leading to the general release of SCO's EdgeClick digital services, which the Company announced was publicly available last week. The Company now has several customers that are actively using the digital services technology.

During the first quarter of fiscal year 2006, the Company completed work with MySQL AB to allow the popular open source database platform to become certified on SCO OpenServer 6. The completion of this certification is an important step in permitting MySQL database customers to select SCO OpenServer as a platform on which to run their MySQL database applications. This opens up new markets for SCO.

Resellers and customers continue to implement OpenServer and UnixWare solutions, and in some cases, customers are replacing competitive operating systems with SCO OpenServer because of the significant performance and reliability advantages SCO OpenServer offers.

Conference Call

As previously announced, The SCO Group will host a conference call at 5:00 p.m. EDT today, March 8, 2006, to discuss the fiscal first quarter results. To participate in the teleconference, please call toll free 1-800-474-8920 or use the toll number 1-719-457-2727; confirmation code: 6227847, 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

Forward-Looking Statements

The statements contained in this press release regarding the adequacy of our cash to fund our business operations and our litigation with IBM 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 our 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 enhance our UNIX operating systems and maintain our UNIX business. These and other factors that could cause actual results to differ materially from those anticipated are discussed in more detail in the Company's periodic and current filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended October 31, 2005. These forward-looking statements speak only as of the date on which such statements are made, and The SCO Group undertakes no obligation to update such statements to reflect events or circumstances arising after such date.

About The SCO Group

The SCO Group, Inc. (SCO) (Nasdaq: SCOX) 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

SCO and the associated SCO logo are trademarks or registered trademarks of The SCO Group, Inc. in the U.S. and other countries. UNIX and UnixWare are registered trademarks of The Open Group. MySQL is a registered trademark of MySQL AB in the USA and other countries. 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)

                                                    January 31,    October 31,
                                                       2006           2005
      Cash and cash equivalents                      $12,018         $4,272
      Restricted cash                                  2,670          5,690
      Available-for-sale marketable securities         7,196          6,165
      Accounts receivable, net                         4,917          6,343
      Other current assets                             2,151          2,454
        Total current assets                          28,952         24,924
      Property and equipment, net                        563            578
      Intangibles, net                                 2,030          2,707
      Other assets                                       731            739
        Total assets                                 $32,276        $28,948

      Accounts payable                                $2,241         $2,197
      Accrued payroll and other expenses               5,202          5,774
      Deferred revenue                                 3,637          3,841
      Other current liabilities                        2,461          4,443
        Total current liabilities                     13,541         16,255
      Long-term liabilities                              335            338
      Common stock subject to rescission                  --          1,018
      Stockholders' equity                            18,400         11,337
        Total liabilities and stockholders' equity   $32,276        $28,948

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

                                                       Three Months Ended
                                                           January 31,
                                                       2006           2005

    Products revenue                                  $6,000         $7,304
    SCOsource licensing revenue                           30             70
    Services revenue                                   1,313          1,491
      Total revenue                                    7,343          8,865
    Cost of products revenue                             584            644
    Cost of SCOsource licensing revenue                4,010          3,493
    Cost of services revenue                             637            749
      Total cost of revenue                            5,231          4,886
      Gross margin                                     2,112          3,979
    Operating expenses:
      Sales and marketing                              2,688          2,944
      Research and development                         1,871          2,088
      General and administrative                       1,592          1,763
      Amortization of intangibles                        592            593
        Total operating expenses                       6,743          7,388
    Loss from operations                              (4,631)        (3,409)
    Equity in income (loss) of affiliate                  (8)            53
    Other income, net                                    145            509
    Loss before income taxes                          (4,494)        (2,847)
    Provision for income taxes                           (87)          (114)
    Net loss                                         $(4,581)       $(2,961)
    Basic and diluted net loss per common share       $(0.23)        $(0.17)
    Weighted average basic and diluted common
     shares outstanding                               20,062         17,751

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