Lindon's SCO Group cuts jobs as revenues decline

Published January 18, 2007 12:00 am
The software company's fourth-quarter income drops 14 percent from the same period in 2005
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The SCO Group, citing stiff competition for its Unix products from the freely distributed Linux operating system, tumbled to deeper losses in its most recent quarter.

The Lindon software company also finally acknowledged Wednesday that long-running speculation about revenue-driven layoffs were true. SCO said it had cut its work force by nearly 15 percent, from 166 to 142 full-time positions, since last October. About 50 remain employed in Utah.

SCO, best known for its ongoing $5 billion federal lawsuit alleging that IBM leaked proprietary Unix code into Linux, saw revenues for the quarter ending Oct. 31, 2006, slide 14 percent, to $7.35 million, down from $8.53 million for 2005's fourth quarter.

For the year, SCO's revenues fell to $29.24 million, down 19 percent from 2005's $36 million. Net losses for fiscal 2006 grew 55 percent, to $16.6 million, compared with a $10.7 million loss the year before.

CEO Darl McBride allowed that the results were poor but also expressed confidence in the company's product development - including new releases of UnixWare and OpenServer, and the fledgling Me Inc. suite of mobile messaging applications. He said they would improve SCO's bottom line in fiscal 2007.

Although he would not categorically rule it out for legal reasons, McBride tried to brush aside speculation that his financially challenged company was on the verge of bankruptcy.

"We're very focused and determined to turn this thing around to the green [ink] rather than the red," McBride said in a teleconference Wednesday afternoon.

He also stressed that SCO continues to have the means to see to trial later this year its IBM litigation and a separate suit against Novell involving ownership of Unix.

"We've committed a lot of money to this fight, and we're not going to walk away now," McBride said, referring to the tens of millions of dollars SCO has spent on lawyers since it first filed the IBM suit in 2003. "We want our day in court."

He also said that despite a federal judge's decision to slash two-thirds of the nearly 300 SCO claims against Big Blue, "significant claims" remain among the 100 or so still left to litigate.

SCO released its earnings after markets - and most analysts' offices - had closed, with the company's stock wrapping up at $1.11 per share, down 2 cents.

However, analyst Rob Enderle of the San Jose, Calif.-based Enderle Group was skeptical of SCO's long-term future.

"Clearly they can't sustain this and just the perception of them losing money at this rate has folks concluding that it won't be long until they go under," he said.

McBride's reaction to similar sentiments has been consistent, and he repeated it for shareholders Wednesday. "The company is comfortable with its cash position and its ability to see our business plan through."


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