SCO Q3 Unix revenue down 16.8%; overall revenue up 23%

Computerworld - Buoyed by new revenue for Unix licensing fees for enterprise users, The SCO Group Inc. today unveiled third-quarter net income of $3.1 million, compared with a net loss of $4.5 million a year earlier.
In an announcement today, the Lindon, Utah-based company said it earned $20.1 million in revenue for the quarter that ended July 31, compared with $15.4 million in revenue a year earlier. The third-quarter revenue figure includes $12.8 million from sales and support of its Unix operating systems and $7.3 million from the company's SCOsource licensing initiative, which began in January when SCO began enforcing its intellectual property rights on Unix.
The revenue from sales of its Unix operating systems is down $2.6 million, or 16.8%, for the quarter, compared with one year ago, when Unix sales revenue was $15.4 million. The company's overall revenue is up because the dropping Unix sales were more than offset by the new licensing fees.
Earnings per diluted share for the quarter are 19 cents, compared with a net loss of 35 cents per share one year ago.
The revenue from the SCOsource licensing program has been coming in since SCO filed a $1 billion lawsuit against IBM in March (see story), alleging that IBM illegally put some of SCO's protected Unix source code into the open-source Linux project. The lawsuit was later amended to include additional claims and now seeks at least $3 billion from IBM.
Last month, SCO announced that it would sell special Unix licenses to allow enterprise Linux users to use Linux legally without violating SCO's alleged intellectual property (see story). On Monday, SCO said it had signed up its first licensee, an unnamed Fortune 500 company, for the special Linux/Unix licenses (see story).
"Our SCOsource initiative continues to gain momentum as we pursue enforcement of the company's intellectual property rights," Darl McBride, SCO's CEO and president, said in a statement. "This is our second consecutive quarter with net income and positive cash generated from operations. These results have strengthened our balance sheet and overall financial position. We intend to use this capital to continue our intellectual property protection and licensing initiative as well as for launching SCOx, our Web services strategy.
"The magnitude of our SCOsource licensing opportunities and our confidence in the SCOsource revenue pipeline is growing each quarter," McBride said.
Many corporate Linux users, meanwhile, are sitting on the sidelines waiting to decide whether to pay the licensing fees, since no court has yet ruled on SCO's claims. SCO has publicly warned companies using Linux that they could potentially become legal targets over the issue (see story).
Last week, IBM countersued SCO, charging that it has infringed on four patents held by IBM and that it doesn't have grounds to sue companies over their use of Linux (see story). Meanwhile, Linux vendor Red Hat Inc. filed a separate lawsuit against SCO alleging unfair competition, trade libel and other charges.
For the first nine months of fiscal 2003, SCO earned net income of $6.9 million, or 47 cents per diluted share, on revenue of $55 million, compared with a net loss of $22.1 million, or $1.58 per diluted share, on revenue of $48.8 million for the comparable nine-month period of fiscal 2002.
SCO said it expects revenue for the fourth quarter, which ends Oct. 31, to be in the $22 million to $25 million range.