SCO ends another year

SCO's teleconference on Tuesday may be more significant for what wasn't discussed during the call, rather than what was discussed. Darl McBride, SCO's Chief Executive Officer (CEO) and Bert Young, SCO's Chief Financial Officer, handled the call for SCO. McBride and Young discussed the company's fourth quarter results, provided a very brief summary of the company's legal situation, and answered a few softball questions from a handful of reporters and one private investor. Once again, LWN's reporter was not among the chosen few graced with an opportunity to ask a question.

What wasn't discussed during the call? Plenty. There was no mention of the Change of Control Agreement filed with the SEC by SCO on December 10, 2004. This agreement would allow "any stock, stock option or restricted stock" granted to listed officers to vest immediately upon takeover of the company. Officers listed in the filing include: Sr. Vice President and General Manager of the SCO Source Division, Chris Sontag; Sr. Vice President and General Manager, of SCO's UNIX Division, Jeff Hunsaker; SCO's Vice President, General Counsel and Secretary, Ryan Tibbits as well as McBride and Young.

The fact that Thomas Raimondi, President and CEO of MTI Technology Corp., resigned from SCO's Board of Directors, was not mentioned during the teleconference. The Canopy Group shakeup that forced CEO Ralph Yarro and CFO Darcy Mott out over the weekend was not discussed. The Canopy Group is SCO's parent company. Both Yarro and Mott are on SCO's Board of Directors, Yarro is the chairman of SCO's board. Yarro has been replaced by William Mustard, formerly a managing director at the Smooth Engine consulting firm. At this point, there's no way of knowing what effect, if any, Yarro's removal will have on SCO.

Perhaps even more telling, McBride was even more subdued during this conference call than during the Q3 teleconference held at the end of August. In August, McBride was still taking the occasional potshot at Groklaw and blustering that IBM had not delivered all documents that the company had been ordered to deliver by the court. The tirades against the GPL, Linux and IP "theft" are gone, and McBride sounded -- at least to this reporter -- quite deflated. In fairness, perhaps McBride is only suffering from the same cold that has plagued this reporter for the past week and a half.

It's also interesting to note that the company's teleconferences are getting shorter over time. The June teleconference was 65 minutes and 52 seconds, according to the SCO website. SCO's August teleconference was a mere 47 minutes and 22 seconds, and Tuesday's teleconference was only 36 minutes and 58 seconds.

So what was discussed during the call? SCO's dismal financial results were trotted out by McBride and Young, though the pair tried to put the best possible spin on the results. The company's revenue dropped to $10,075,000, compared to $24,290,000 during the fourth quarter in 2003. This includes a drop in SCOSource revenue, from $10,316,000 in 2003 during the fourth quarter, to $120,000 in 2004. The $120,000 is not from a new licensee, but holdover from the EV1 deal. In short, SCO realized no new revenue from SCOSource during the fourth quarter. Overall, SCO's 2004 revenue is $42,809,000, compared to $79,254,000 for 2003.

McBride also announced that the update for OpenServer, code-named "Legend," will be released in the second quarter of 2005. Previously, the company had said Legend would be released in the first quarter of 2005. SCO's UNIX product revenues were about $8.3 million. It would seem the only source of revenue for SCO in the immediate future is the Unix products line.

SCO did pocket $500,000 recently, thanks to a deal with Vintela, though it won't show up on the books until the first quarter of 2005. Back in April 2003, SCO sold everything related to its Volution product to Center 7 in exchange for a $500,000 promissory note. Center 7 has become Vintela, a company that provides products that allow organizations to manage Unix, Linux and Mac systems with Windows technologies like Active Directory. Vintela has been in the news lately due to a deal with Microsoft that puts about $10 million into the company. Canopy is also an investor in Vintela, though it's hard to tell from the Canopy Group website, which no longer proudly lists companies it has invested in. In fact, it's only a short walk from the Vintela offices to the SCO offices. Apparently, both companies are housed in the Canopy complex in Lindon, Utah.

SCO's Unix business brought in about $8.2 million, after expenses of $1.7 million. The company continued its "restructuring" during the fourth quarter, which has reduced head count to less than 200 employees. It's worth noting that SCO's head count in 2002, prior to filing suit against IBM, was about 340 with revenue of about $15.5 million for the fourth quarter of 2002.

SCO is not the cash-rich company it once was. The company has had to place about $5 million in escrow, and owes Boies, Schiller and Flexner about $24.3 million at the end of this quarter. The company had a closing cash balance of $31.4 million at the end of the quarter, according to Young, leaving SCO with about $7 million going forward.

McBride was sure to emphasize, several times, that the company had capped its legal fees with Boies, Schiller & Flexner. The company has also increased Boies, Schiller & Flexner's contingency fees. Should SCO prove successful in any of their legal attacks, Boies, Schiller & Flexner stand to get between 20 and 33 percent of the booty. McBride offered a very succinct summary of their legal position with IBM, and said "we feel our case is developing well, and the specifics of this are laid out in our filings with the court." It's worth noting that, in past teleconferences, McBride has been significantly more upbeat and effusive about SCO's legal developments.

McBride essentially admitted there was little left to the DaimlerChrysler case, saying that "we determined that it would not be a wise use of resources to pursue the timeliness claim alone." The court has denied SCO's motion to stay the case, and the case has been dismissed without prejudice with approval of SCO and DaimlerChrysler.

For those interested in listening to the teleconference in its entirety, there is an archive of SCO teleconferences on the SCO website. Groklaw also has a transcript of the call.

---

(Log in to post comments)