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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

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