Posted on 12/18/2005 8:33:40 AM PST by TechJunkYard
Utah's SCO Group, its finances stressed by sluggish markets and the mounting costs of its Linux-related lawsuits, has gained some breathing room with a $10 million private stock placement.
The Lindon software company, in the third year of its $5 billion federal court complaint against IBM, says the recent sale of more than 2.85 million shares of common stock was primarily to existing institutional shareholders.
"The new infusion should give us a good strong balance sheet for our plans over the next year or two," SCO spokesman Blake Stowell said Friday.
Analysts took another view. The Yankee Group's Laura DiDio warned that SCO's future depends on it being able to "jump-start its product sales. [Otherwise] the $10 million private stock sale to institutional investors will only postpone the inevitable by 12 to 18 months. . . . In the event that SCO does prevail in its main lawsuit against IBM - which is a long shot - it would be a very big payday for SCO. But that could take years. In the meantime, it is imperative that the company find a market for its products."
Added another analyst, Enderle Group founder Rob Enderle: "SCO is hanging on by its teeth. There are clearly those who have access to funds who are covering their bets, but it will be incredibly hard for SCO to go back to the well many more times."
SCO's U.S. District Court suit against IBM - like separate federal cases involving Novell, RedHat and others - claim that portions of SCO's Unix code were illegally exported to the freely distributed Linux operating system.
To keep those cases moving forward, SCO has poured multiple millions of dollars into the pockets of its attorneys - $3.1 million during its most recent quarter.
Legal bills have easily become the company's prime expenditure, even as its revenues have tumbled. In September, SCO reported third-quarter revenues of $9.35 million, down from $11.2 million a year earlier, and a net loss of $2.4 million, compared with a profit of $7.5 million the same time last year.
The company's campaign to license Linux end users in return for not some day suing them for copyright infringement generated $32,000 - about 1 percent of its legal expenses for the quarter.
SCO's CEO Darl McBride stated the success of raising $10 million through the recently completed private stock transactions was a testimony of investors' support for the company's course.
Chesapeake Partners Management Co. accounted for the bulk of the stock purchased, according to Securities and Exchange Commission records. The Baltimore firm acquired 2.065 million shares, gaining 10 percent ownership; SCO board member Darcy Mott bought almost 175,000 shares.
"This added investment is a vote of confidence . . . that will bolster our efforts over the long term to succeed in the marketplace with our products and continue protecting our intellectual property," McBride said.
SCO has tried to turn attention to its newest Unix product, critically acclaimed OpenServer6. Whether sales of the product are beginning to match its critical acclaim will be revealed when SCO releases its fiscal 2005 report Thursday.
It could be another month or two before the impact of a recently implemented employee stock purchase rescission is measured. The deal, covering several transactions between November 2004 and June 2005, involves more than 337,000 shares of SCO common stock.
The offer, which includes repurchase of shares for what they were originally bought, plus interest, expires on Jan, 20, 2006. Employees are not required to participate.
Stowell says the rescission offer was made because of oversights that left the sales short of both federal and state securities regulations. "We [did not] properly set up the employee stock purchase plan in some states as needed. This was essentially a clerical error."
I always like to get to these threads before that one topic, M$ sycophant arrives.
I gotta go make some popcorn.
Thank goodneess for the anti-communist microsoft, who gave access to its source code to chineese goverment programmers.
But you know, linux is dangerous because anyone can see the source code. It's better if the code of your operatign system is only seen by company itself and a handful of chineese communists.
Must we suffer that much longer?
What are the odds that we get to see some more greek header files on Dec22?
This is the last Micro-suck slush-box I'm ever going to own (the one I'm posting from). Just put Xandros on my laptop and bought a new Dell "n" for my home...I'll be loading linux on that this afternoon....probably Redhat. Choices are good.
:)
"$10 million private stock sale to institutional investors will only postpone the inevitable by 12 to 18 months"
The best reason I can see why the current investors will throw more money down this hole is that they don't want a bankruptcy filing. A bankruptcy filing will open up all of their financial secrets to an administrator, the courts and hence the world.
AT that point, any aid and comfort (not to mention money) give my companies like Sun and M$ will be known to all.
IBM is doing exactly what I figured they'd do... run the lawsuit as long as they can, outspending SCO until SCO runs out of cash.
"This is the last Micro-suck slush-box I'm ever going to own "
I'm still using both Windows 2000 as well as Linux, but if I have to jump ship completely, it won't be too painful. Using Linux, Apache, Mysql, Java, Netbeans, Open Office, Jahshaka, Firfox, Php, Tomcat. 64Bit and multiprocessing too.
Here's the thing, SQL 2005 is expensive, and who knows how many ways Vista will mess with you, both on price and coding. I'm a hap hap happy boy that I made the jump, it wasn't an obvious choice.
SCO is going down the same tube as Ashton-Tate.
DBase III owned the PC database market till their management wizards decided it was more important to sue the clones than to write new code that actually worked.
Seen any of their products on the shelf lately?
So9
> IBM is doing exactly what I figured they'd do...
> run the lawsuit as long as they can, outspending
> SCO until SCO runs out of cash.
Except that as I read the filings on groklaw, it is
SCO that has been substantially more active in inventing
reasons for delay.
My guess is that SCO expected IBM to settle (or buy out
SCO) at the outset, and there was no Plan B. SCO is
having to make it up as they go now, and they are
running out of time, ideas, and yes, money.
SCO also didn't count on a dedicated site (groklaw.net)
documenting every word, and doggedly following the
money, on suspicion that this whole thing was an MS ploy.
If MS is involved, extremely convoluted schemes are
now necessary to deliver cash not bearing Mr.Bill's
fingerprints.
And two years on, we still have no notion of what
IBM is supposed to have done to SCO. And as I read
the SCO-Novel agreements, SCO owes Novell more $
than they have left.
IBM is apt to get nothing but satisfaction from
crushing SCO.
What they will get is a precedent against future nonsense like this.
SCO's reasons for scrambling for delay after delay are pretty apparent - They have no case. This was either a nuisance suit designed to get them bought out by IBM or a hail mary to wrest control of the technology that is currently burying them.
Either way, it was a very stupid move.
>> IBM is apt to get nothing but satisfaction from crushing SCO.
> What they will get is a precedent against future nonsense like this.
I'd feel more confident about that if this all results in
some referrals for criminal prosection.
I'm sure the miscreant principals in this have already
feathered their Caiman Island nests, so the SEC will
need to nab them before they get to the airport.
Sort of ironic that one of the accounting firms IBM has
subpoena'd in this case is the same one that collapsed
after Enron.
I'd say somewhere between slim and none... Darl's not gonna want to talk about the losing litigation strategy, just the "stellar" quarter and past year's "growth".
I'll be very surprised to see any of the things that SCO said they had, that the court ordered them to submit two years ago, that IBM complained about umpteen times, that Judge Kimball was astonished that he never saw.
I really don't think there will be a trial. I expect this case to go away on a Summary Judgement.
You mean the GPL that makes up a good-sized chunk of their OpenServer distribution? Yeah, that's the one I thought you were talking about.
Damn hypocrites.
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