SCO sends notices to 6,000 Linux licensees

The SCO Group has begun sending written notices to its 6,000 Unix licensees requiring them to certify that they are in full...

The SCO Group has begun sending written notices to its 6,000 Unix licensees requiring them to certify that they are in full compliance with their Unix source code agreements and are not using Unix code in Linux.

In addition, SCO said it is sending a second set of letters outlining additional evidence of copyright infringement to a subset of 1,500 global Linux users that SCO first contacted in May about copyright infringement. The company predicted that it could spend up to $16m in its existing financial year on legal fees associated with its legal fight over Linux.

Chris Sontag, senior vice-president of SCO, said the notices "formally communicate to Unix source code licensees and certain commercial Linux end users that they must utilise SCO intellectual property within the bounds of their existing legal agreements and the Digital Millennium Copyright Act".

SCO also announced its first full year of profitability today, reporting $5.3m in net income for its 2003 financial year, which ended 31 October, despite legal fees paid out to wage its Unix copyright fight. That fight began when SCO in March filed a $1bn lawsuit against IBM for allegedly breaching its Unix licensing contract.

The company would have reported net income of $14.3m for the year had it not reported a charge of nearly $9m to pay law firms involved in the lawsuit and related efforts to "enforce its intellectual property rights", SCO officials said.

The profit for the year was $79.3m in revenue, up 23% from $64.2m the previous year.

For the fourth quarter, SCO reported $24.3m in revenue, a 57% increase over revenue of $15.5m for the same quarter a year earlier.

The fourth-quarter revenue included $14m from sales of Unix products and services, with an additional $10.3m from licensing agreements with Microsoft and Sun Microsystems signed earlier in the year.

The $9m charge for legal fees kept the company's fourth quarter in the red. The company reported a net loss of $1.6m but said it would have seen net income at $7.4m without the legal expenses.

SCO chief executive officer Darl McBride noted that the company's financial position has been strengthened by a $50m investment in SCO by BayStar Capital. Accounting for that investment had delayed the release of the yearly and quarterly financial results by two weeks.

McBride said SCO closed the 2003 financial year with $64m in cash, which gives SCO "the resources and the flexibility to both enforce and protect its Unix intellectual property and expand its core business".

For this quarter, which ends 31 January, the company expected total revenue to be between $10m and $15m, in line with the same quarter last year. The company also said expenses will rise in the next financial year from SCO source initiatives as the company "expands the scope of its legal strategy to enforce and protect its Unix intellectual property".

SCO officials predicted that spending on legal fees will rise by as much as an additional $2m per quarter in this financial year, up from legal spending last year of $2m to $3m per quarter.

Matt Hamblen writes for IDG News Service

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