It's those dratted legal expenses again, I think, although they are down a bit, but still in the millions this quarter. "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," they say in their press release.
Legal fees were capped, but lawyers don't pay their own expenses. Evah. Then too, there's all the experts and then this arbitration thingie and one thing and another, and whammo. Net loss. Oh, and revenue is down, too compared to the same quarter a year ago.
"The decrease in revenue and increase in net loss
were primarily attributable to continued competitive pressures on the
Company's UNIX products and services," their press release says. Also, everybody hates their litigious ways. Well. Maybe not *everybody*. Couldn't that be it, though? I think that might be the problem, but they never listen to me. They are, they say, "moving forward" with their UNIX solutions and mobile services strategy and remain committed to defending their precious intellectual property through the legal process.
If they have any "intellectual property". And if they can find it someday. And then ID it. And point it out to the judge with specificity. And then prove it and all that.
Now that I think of it, maybe that's the fundamental problem. You think?
The SCO Group Announces Third Quarter Fiscal 2006 Results
LINDON, Utah, Sept. 6
/PRNewswire-FirstCall/ -- The SCO Group, Inc., a leading provider of UNIX(R) software technology and
mobile services, today reported results for its third quarter ended July
Revenue for the third quarter of fiscal year 2006 was $7,421,000 as
compared to $9,353,000 for the comparable quarter of the prior year. The
net loss for the third quarter of fiscal year 2006 was $(3,580,000), or
$(0.17) per diluted common share, as compared to a net loss of
$(2,372,000), or $(0.13) per diluted common share, for the comparable
quarter of the prior year. The decrease in revenue and increase in net loss
were primarily attributable to continued competitive pressures on the
Company's UNIX products and services.
Legal and other expenses incurred in connection with the Company's
litigation were $2,315,000 for the third quarter of fiscal year 2006, which
was down from costs of $3,085,000 for the third quarter of fiscal year 2005
and down from costs of $3,762,000 for the second 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 competition continues to be difficult for us in the operating
systems business, we are moving forward with our UNIX solutions and mobile
services strategy, as we believe that the market, as well as the benefits
to our customers and partners, is significant," said Darl McBride,
president and CEO of The SCO Group. "The Company has made important strides
in the development and deployment of its Me Inc. mobile services and
development platform. We remain committed to our UNIX business, introducing
new mobile services to the marketplace and defending our intellectual
property through the legal process."
Revenue for the nine months ended July 31, 2006 was $21,890,000 as
compared to $27,476,000 for the nine months ended July 31, 2005. The net
loss for the nine months ended July 31, 2006 was $(12,855,000), or $(0.62)
per diluted common share, as compared to a net loss of $(7,295,000), or
$(0.41) per diluted common share, for the nine months ended July 31, 2005.
Cash and cash equivalents, available-for-sale marketable securities and
restricted cash to be used for certain legal expenses totaled $15,521,000
as of July 31, 2006.
The Company's Business
During the third quarter of fiscal year 2006, the Company introduced
new products and solutions to the market from both its UNIX and mobile
services groups. This included the introduction of SCO H.A. Clusters for
SCO OpenServer 6, as well as updates to SCO OpenServer 6 and SCOoffice
During the third quarter of fiscal year 2006, the Company launched
initiatives that should benefit the Company's mobile services platform over
the coming quarters. One initiative is a developer challenge that is
designed to incent developers from around the world to begin developing
mobile applications that will run on the Company's Me Inc. mobile platform.
Many developers signed up for this challenge and also participated in a
number of developer specific break out sessions at the Company's annual SCO
Forum conference that was held in early August 2006.
As a second initiative and to assist developers in the creation of
mobile applications, the Company has introduced the Me Inc. Toolkit, which
includes many of the essential tools needed for helping developers
jump-start their mobile application development projects. In addition, the
Company has established industry partnerships with such companies as
Palm(R) and Microsoft(R) that will allow the Company to extend the Me Inc.
development tools to a broader set of developers with established
development skills, including those that use Microsoft Visual Studio(R).
As previously announced, The SCO Group will host a conference call at
5:00 p.m. EDT today, September 6, 2006, to discuss the fiscal third quarter
results. To participate in the teleconference, please call toll free
1-800-967-7140 or use the toll number 1-719-457-2629; confirmation code:
2529843, approximately five 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
The statements contained in this press release regarding (i) the
Company's progress with its UNIX solutions and mobile services strategy,
and its potential market, (ii) the Company's commitment to its strategy of
strengthening its UNIX business, introducing new mobile services to the
marketplace and defending its intellectual property through the legal
process, (iii) the benefits that the Company expects to receive relating to
the launch of its mobile services platform, and (iv) the Company's
expectation that its industry partnerships will allow it to extend the Me
Inc. Toolkit to a broader set of developers, 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 the Company's operating system products which could impact the
Company's results of operations, increased or unforeseen legal costs
related to the Company's litigation, the inability to devote sufficient
resources to the development and marketing of the Company's products, and
the possibility that companies with whom the Company has formed
partnerships will decide to terminate, or reduce the resources devoted to,
their partnership with the Company. 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, and its subsequent Forms 10-Q.
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 is a leading provider of UNIX software
technology and mobile services, offering SCO OpenServer for small to medium
business, UnixWare for enterprise applications, and Me Inc. for mobile
services. SCO's highly innovative and reliable solutions help millions of
customers grow their businesses everyday, 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, SCO OpenServer, Me Inc. 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.
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 Sheet Data
(unaudited, in thousands)
July 31, October 31,
Cash and cash equivalents $8,861 $4,272
Restricted cash 2,010 5,690
Available-for-sale marketable securities 5,099 6,165
Accounts receivable, net 4,072 6,343
Other 1,720 2,454
Total current assets 21,762 24,924
Property and equipment, net 610 578
Intangibles, net 677 2,707
Other 423 739
Total assets $23,472 $28,948
Accounts payable $2,239 $2,197
Accrued payroll and other expenses 4,821 5,774
Deferred revenue 2,875 3,841
Other 1,956 4,443
Total current liabilities 11,891 16,255
Long-term liabilities 227 338
Common stock subject to rescission -- 1,018
Stockholders' equity 11,354 11,337
Total liabilities and stockholders' equity $23,472 $28,948
Condensed Consolidated Statement of Operations Data
(unaudited, in thousands, except per share data)
Three Months Ended Nine Months Ended
July 31, July 31,
2006 2005 2006 2005
Products revenue $6,201 $7,953 $17,904 $23,095
SCOsource licensing revenue 31 32 95 132
Services revenue 1,189 1,368 3,891 4,249
Total revenue 7,421 9,353 21,890 27,476
Cost of products revenue 478 695 1,559 1,902
Cost of SCOsource licensing
revenue 2,315 3,085 10,087 9,467
Cost of services revenue 666 700 2,012 2,195
Total cost of revenue 3,459 4,480 13,658 13,564
Gross margin 3,962 4,873 8,232 13,912
Sales and marketing 3,111 2,935 8,656 8,849
Research and development 2,029 1,940 5,786 6,145
General and administrative 1,829 1,647 5,139 5,446
Amortization of intangibles 593 593 1,778 1,779
Total operating expenses 7,562 7,115 21,359 22,219
Loss from operations (3,600) (2,242) (13,127) (8,307)
Equity in income (loss)
of affiliate -- (19) (8) 51
Other income (expense), net 127 (27) 588 1,282
Loss before provision for
income taxes (3,473) (2,288) (12,547) (6,974)
Provision for income taxes (107) (84) (308) (321)
Net loss $(3,580) $(2,372) $(12,855) $(7,295)
Basic and diluted net loss
per common share $(0.17) $(0.13) $(0.62) $(0.41)
Weighted average basic and
diluted common shares
outstanding 21,063 17,993 20,703 17,885