SCO's IP licensing revenues dry up

Lindon (UT) - The SCO Group reported revenues of $6.0 million and a loss of $1.1 million for the second quarter of its FY 2007. For the first time since 2004, SCO did not record any revenues from its SCOsource licensing program, which was created to collect license fees for SCO code that allegedly is included in Linux.

According to the company, the revenue decline from $7.1 million in Q2 2006 was primarily due to "continued competitive pressure" on the firm’s UNIX products ; the bottom line improved from a loss of $4.7 million to $1.1 million in the same time frame as a result of reduced legal costs and operating expenses.

"Even though competition continues to impact our revenue, we are pleased that our legal costs and operating expenses are lower than the comparable prior periods which improved our financial results," said Darl McBride, president and CEO. "We are committed to our strategy of serving our UNIX customers, developing innovative new mobile technologies and protecting our valuable intellectual property."

There was no new information on SCO’s strategy in its multi-billion dollar lawsuit against IBM, besides the fact that the company intends to scale down its legal expenses in this matter. The company spent nearly $1.1 million in the second quarter to keep the proceedings alive. Without this expense, the Q2 loss would have come in closer to about $70,000. The cost is down significantly from more than $3.7 million in Q2 2006.

The Q2 financial sheet reveals that SCO did not make any money from its SCOsource licensing program, which was created following the firm’s suit against IBM and claims that Linux violates the intellectual property of SCO. Scaled down legal efforts apparently also resulted in dwindling revenues from SCOsource, which brought in $829,000 in 2004, $166,000 in 2005, $116,000 in 2006 and $23,000 in Q1 2007. At least so far, the effort to profit from Linux installations has been an expensive adventure for SCO : The company had to invest $46.5 million to collect $1,134,000 in license fees.

SCO said that it expects to incur legal costs related to its ongoing litigation during the 2007 fiscal year, but it believes that total cost accumulated in fiscal 2007 will be less than it was in the 2006 fiscal year ($12.3 million). "Because of the unique and unpredictable nature of the Company’s litigation, the occurrence and timing of litigation-related costs is difficult to predict, and will be difficult to predict in the future," the firm wrote in its Q2 press release.