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SCO suffers $2.3m loss

The SCO Group has reported a net loss of $2.25m for the first quarter of its 2004 financial year, ending 31 January.

The loss came as revenues from the company's SCOsource initiative plummeted from $10.3m in the third quarter of 2003 to $20,000 in the company's most recent quarter.

SCO had reported a loss of $724,000 on revenue of $13.5m for the same quarter a year ago.

The drop in SCOsource revenue came because both Microsoft and Sun had completed the quarterly completed payments they had been making to SCO for Unix licensing deals they had signed with the company.

SCO announced its financial results on the same day it revealed it has launched lawsuits against DaimlerChrysler and auto parts retailer AutoZone, alleging that AutoZone had violated SCO's copyright by using Linux, and that DaimlerChrysler had violated its SCO software licensing agreement with SCO by failing to comply with a software audit.

SCO is also engaged in lawsuits with IBM, Novell and Red Hat, relating to its claim that the Linux operating system illegally contains SCO's intellectual property.

SCO expected its licensing revenue to increase gradually in the year ahead as the company begins to sign deals with Unix suppliers and Linux end-users, said Bob Bench, the company's chief financial officer.

The company has walked away from a number of short-term licensing deals in pursuit of agreements that would be more profitable in the long term.

"There are deals we could have closed last year in the tens of millions, but we felt that expediency was no longer required and we needed to look at the longer term," he said.

SCO spent $3.4m operating the company's SCOsource programme, which seeks licensing revenue for the AT&T System V Unix licence that SCO acquired in 2000.

The company expected to expand SCOsource operations in the next quarter with more lawsuits against Linux users, but one financial analyst expressed skepticism that this would help SCO's bottom line.

Dion Cornett, a managing director with Decatur Jones Equity Partners, said that he had been expecting SCO to earn $7m in SCOsource revenue in 2004, but that he cut that number to zero recently, based on feedback from Linux users.

"I had been expecting customers to sign up rather than risk litigation," he said. "My sense is that SCO is sort of losing the PR [public relations] battle in the IT community."

Linux customers do not expect to sign licence agreements with SCO until the company proved its case, Cornett said.

Robert McMillan writes for IDG News Service

SCO sues DaimlerChrysler and AutoZone >>


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