SCO Revenue Plummets

The embattled Lindon, Utah, company last week reported revenue of $10.1 million and a loss of $14.95 million, or $1.06 per share, for its second quarter ended April 30. Revenue was down considerably from $21.4 million posted during the same quarter a year ago, primarily due to a slump in SCOsource licensing revenue, which sunk to $11,000 last quarter.

SCO CEO Darl McBride and newly appointed CFO Bert Young said SCO nevertheless has a sizable war chest and roughly $10 million in Unix revenue each quarter to fund its legal action against IBM, Novell, Red Hat and customers AutoZone and DaimlerChrysler.

"We're going to have enough cash to get to our destination," said McBride. "We have got the firepower on the legal side, the cash necessary and very strong [legal] claims to get us to where we need to go."

During the quarter, the company also structured a deal that paid off investor BayStar Capital $13 million while leaving $48 million in the bank. SCO spent roughly $4.4 million last quarter on legal expenses and expects to burn between $3 million and $5 million each quarter on litigation as it battles to protect its Unix IP in court.

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SCO last week asked the court to delay the beginning of the trial until September 2005. It is currently slated to begin next April. Industry observers say the case could drag on for years.

Michael Graham, an intellectual property attorney and partner at Chicago law firm Marshall, Gerstein and Borun, said a delay would be par for the course in such a complex, far-reaching case.

"A request for a delay of up to five months would not be unusual and should not be unanticipated by either SCO or IBM," he said. "This case is too important to the Linux and the open-source communities to be hurried."

At least one hard-liner in the Linux solution provider community, however, said SCO should be ready to prove its case now. "No delay should be granted, because SCO has been claiming that they possess the smoking gun," said Douglass Hock, president of Ideal Systems, Orlando, Fla.