SCO’s downhill slide

Darl McBride, CEO of controversial Unix software maker SCO must surely suspect that the game is nearly up. He defiantly quotes Mark Twain, proclaiming “rumours of our death have been greatly exaggerated”. But the statement made by SCO’s long-time rival Novell in January 2007 that the company’s bankruptcy is “imminent and inevitable” has a truer ring to it.

SCO is teetering on the edge. For its fiscal year, ending 31 October 2006, revenues fell 19% after a slump in the sales of its Unix products and services, from $36.0 million to in 2005 to $29 million in 2006. Losses at the company widened, from $10.7 million to $16.6 million.

And while SCO’s fortunes have been flagging for the last four years, its current position is perilous. Its dwindling cash reserves cannot sustain many more loss-making quarters.

Most of SCO’s money has been ploughed in to its ill-advised and ill-fated lawsuit against IBM. SCO had claimed ownership of parts of the Linux kernel, and has sought to recoup huge damages. But the extent of its lawsuit has been whittled away through a series of court rulings. One judge lambasted SCO’s failure to define exactly which lines of IBM’s Linux code constituted copyright infringement, comparing it to accusing someone of theft without saying what had been stolen. SCO could yet be forced to close the door before the remnants of its case are heard.

In spite of these apparent difficulties, SCO’s McBride remains upbeat and says that the company is continuing to develop and promote its UNIX products and will return SCO to profitability. It has reduced headcount, and an end to its IBM lawsuit would save it nearly $2 million a quarter in legal bills.

But it is lawsuits that look set to decide its fate. In January 2007, Novell filed charges against SCO, seeking $26 million in payment for Unix licensing fees, it claims it is owed. Novell’s lawyers want that payment to be made before the company collapses. If the ruling goes against SCO, its cash woes may prove to be terminal.

Ian Cowley

Ian Cowley is the managing director of printer cartridge company By taking a systematic trial and improvement approach, Cowley and marketing director Sean Blanks have created a Sunday...

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