Missing deadlines puts SCO on the spot
Utah's SCO Group is flirting with being delisted from the Nasdaq Stock Market after missing an already-delayed deadline for filing its 2004 annual report.
Under federal law, the Lindon-based software company - best known for its $5 billion, Linux-related lawsuit against IBM - was to have filed its annual report to the Securities and Exchange Commission within 90 days of the Oct. 31, 2004, end of its fiscal year. Instead, SCO sought an extension on Jan. 31.
The postponed report was due Tuesday, a deadline SCO also missed. The company had still not filed by the close of trading Wednesday, raising alarm among its investors and market analysts alike.
"It is clearly a red light," said Laura DiDio, an analyst at The Yankee Group in Boston. "If I were an investor, I would be very concerned."
In a brief statement issued Wednesday, SCO spokesman Blake Stowell confirmed only that the delays came "because management and the company's independent auditors continue to examine certain matters related to the issuance of shares of the company's common stock pursuant to its equity compensation plans."
SCO plans to file its belated report "as soon as possible . . . when its analysis is complete."
Internet discussion boards following SCO were awash with worried speculation Wednesday as the company's stock - trading for $4.40 per share at mid-day - slipped 10 cents in the final hours.
And SCO's missed deadlines did not go unnoticed in Manhattan, where Nasdaq officials confirmed they likely will consider actions that could lead to delisting the company's stock.
"We can't discuss specifics as they relate to a company listed on Nasdaq," exchange spokesman Wayne Lee said. "But I can say Nasdaq does have state-of-the-art surveillance systems and is immediately aware of [delinquent companies]."
However, it appeared there had indeed been some kind of communication between Nasdaq and SCO about possible delisting. Stowell would not provide details of that contact, other than to confirm the company would be filing a document with the SEC that " will provide further detail on our communications with Nasdaq."
Lee said that when a company misses filing deadlines, Nasdaq typically adds an 'E' to the firm's securities ticker symbol to "indicate to the investing public that the company is indeed delinquent in its filing," he added.
He said it usually takes two days to process addition of an E and for traders to see the change, which is not otherwise announced by Nasdaq. SCO still carried its SCOX symbol at the close of trading Wednesday.
As for SCO losing its place on the exchange altogether, Rachel Tand, a listing analyst with the exchange, said all companies delinquent in filing their annual reports are generally subject to delisting.
"We issue a letter to the company indicating it will be delisted and detailing the subsequent processes," Tand said. "They then have seven days from the date on the letter to request a hearing. If they do nothing in nine days from then, they can be delisted."
Rob Enderle, of the Enderle Group, said SCO's filing difficulties are just a glimpse into "a very complex" situation for the Utah company, which not only faces a tough market for its Unix products and the heavy costs of prolonged litigation against IBM and others, but is dealing with "turmoil" inside its parent company, The Canopy Group.
Canopy, an umbrella tech venture capital firm founded by software entrepreneur Ray Noorda, is embroiled in dueling lawsuits stemming from the December ousters of Canopy Chief Executive Ralph Yarro and two of his officers.
Yarro, who until he was fired had been a Canopy director along with Noorda and his wife, Lewena, also is chairman of the SCO board.