The SCO Group's revenue continued to decline in its most recent quarter, but the company that launched a legal attack on Linux reported a narrower net loss compared with the year earlier.
For SCO's fiscal second quarter, which ended on 30 April, revenue declined to $9.3m (£5.1m) from $10.1m a year earlier. Its net loss diminished from $14.7m to $2m.
The year-earlier loss was deepened by one-time charges for restructuring and for goodwill impairment. Also augmenting the difference compared with the most recent quarter was the sale this year of SCO's shares in Trolltech, a move that raised $779,100.
SCO has two major business strategies. One is selling its two versions of Unix, UnixWare and OpenServer; the latter is older but still more popular. But SCO plans to launch a new version code-named Legend on 22 June that uses the UnixWare core and improves performance.
Unix revenue declined from the year-earlier period, however, down from $8.4m to $7.8m. After cost-cutting in recent quarters, the division is profitable, but it faces increasing competition from Linux and Windows.
SCO's second strategy is the longer-term legal attack against IBM and other Linux allies, an attack that's based on the contention that Big Blue violated copyrights SCO purports to own by moving Unix technology to Linux. SCO had hoped to sell licences to protect Linux users from legal attack, but there have been few takers; revenue from that SCOsource initiative was $30,000 in the most recent quarter.
SCO chief executive Darl McBride claimed a minor victory in one of the company's cases, which accuses AutoZone of copyright infringement for using Linux. Though that case is on hold until results from the IBM case emerge, the legal discovery process is continuing.
Through that discovery, SCO said it found instances in which AutoZone mishandled SCO code, but that because it's now removed, SCO won't seek a preliminary injunction against AutoZone.
"Contrary to AutoZone's various statements to the court, SCO found through discovery, including sworn depositions, many instances of copying of programs containing SCO OpenServer code," McBride said in a conference call. "AutoZone now has removed the code it used in its migration to Red Hat Linux. Because that claim is now removed, SCO is not going to move for a preliminary injunction at this time."
AutoZone didn't immediately respond to requests for comment.
Troubles filing regulatory reports on time earlier this year led to a threat that SCO's stock would be delisted, which meant SCO's ticker traded for a time under the symbol SCOXE. But the company met Nasdaq's requirements and in April its stock began trading again under its regular symbol, SCOX.
Talkback
You wrote: "After cost-cutting in recent quarters, the [Unix] division is profitable, but it faces increasing competition from Linux and Windows." A truer picture is in http://www.ovum.com/news/euronews.asp?id=2660: "SCO over the first six months of this fiscal year the company has spent $1 million less on R&D and nearly $4million less on sales and marketing." This is like cutting off the right arm you were using to defend yourself to avoid a gash on the cheek. The ovum article also said: "We believe that the most likely outcome in SCO's case against IBM is failure and our advice to existing users of SCO's technology is to make plans to migrate away from it."
Autozone migrated away from SCOG several years ago, and quickly completed the last little bit when SCOG filed suit.
SCOG is shipping a new release in June, but who will buy it, considering SCOG's pariah status, the fact that its principal business now seems to be unsuccessfully suing its former customers, and the likelihood that SCOG will be unable to support its current products, much less an upgrade produced while it was cutting back on research?
You also wrote: "SCO ... claimed a minor victory [over] AutoZone ... using Linux. Though that case is on hold until results from the IBM case emerge, the legal discovery process is continuing. Through that discovery, SCO said it found instances in which AutoZone mishandled SCO code, but that because it's now removed, SCO won't seek a preliminary injunction against AutoZone. 'Contrary to AutoZone's various statements to the court, SCO found many instances of copying of programs containing SCO OpenServer code,' McBride said in a conference call. 'AutoZone now has removed the code it used in its migration to Red Hat Linux. Because that claim is now removed, SCO is not going to move for a preliminary injunction at this time.'"
You should have checked SCOG's statements more thoroughly. Here are the facts contradicting the false and misleading statements.
First, the entire case, includiing discovery, is on hold. The limited discovery order expired when SCOG declined to file for a preliminary injunction by the deadline.
Second, SCOG gives the impression that Autozone illegally copied SCOG's source code into Linux. In fact:
a. While migrating away from SCOG's programs, Autozone copied its data, including copies of SCOG's executable products onto a PC running Linux. SCOG could not and did not run SCOG's products under Linux, then or later, and did not distribute those products.
b. Autozone had, and still has, a contract with SCOG allowing Autozone to make copies of SCOG's products. SCOG has shown no evidence of a restriction in the contract against copying the files to hardware running a different operating system, and I don't think that any such restriction exists. Thus Autozone did not mishandle SCOG's code.
c. I think that the sequence of events contradicts SCOG's explanation of its reason for failing to move for a preliminary injunction. Autozone said:
"AutoZone's ... "Spirit" server had some OpenServer compiled programs on it because of a recent restoration of the server after a crash. ... All of the files ... were loaded back onto the machine during the recovery process.... All of these programs (1,130) were removed from the server by October 26, 2004, after copies and backups were made ... The relevant OpenServer agreements between SCO and AutoZone ... are still in place and do not include any prohibitions on AutoZone's use of OpenServer compiled code on Linux machines. Accordingly, most of the OpenServer compiled code discussed above is properly licensed, and AutoZone is under no legal obligation to delete or recompile the code. Nevertheless, because AutoZone does not need the code to be compiled under OpenServer to serve its purposes (or in some cases, because AutoZone no longer needs the code at all), AutoZone has removed or recompiled the code as a courtesy to your client and to a
Unix/Autozone corrections continued.
My post on Unix dec was snipped, so here is the rest, with a little overlap.
c. I think that the sequence of events contradicts SCOG's explanation of its reason for failing to move for a preliminary injunction. Autozone said:
"AutoZone's ... "Spirit" server had some OpenServer compiled programs on it because of a recent restoration of the server after a crash. ... All of the files ... were loaded back onto the machine during the recovery process.... All of these programs (1,130) were removed from the server by October 26, 2004, after copies and backups were made ... The relevant OpenServer agreements between SCO and AutoZone ... are still in place and do not include any prohibitions on AutoZone's use of OpenServer compiled code on Linux machines. Accordingly, most of the OpenServer compiled code discussed above is properly licensed, and AutoZone is under no legal obligation to delete or recompile the code. Nevertheless, because AutoZone does not need the code to be compiled under OpenServer to serve its purposes (or in some cases, because AutoZone no longer needs the code at all), AutoZone has removed or recompiled the code as a courtesy to your client and to avoid any further issue regarding these files in this litigation." SCOG took all that time to decide that this statement justified declining to file a preliminary injunction. Why didn't SCOG file the PI on grounds that the evidence so far indicated the presence of more evidence to be discovered showing continuing infringement?
d. Groklaw (http://www.groklaw.net/article.php?story=20050601230259434) says: "And on page 8, they say they found AutoZone copied two COFF files, Compx and Decompx, "which were programs that it had licensed from a third party which contained SCO code onto all 3500 of its machines located in the United States and Mexico and has been using those files since at least January 2000." ... They licensed some code from somebody else, binaries to boot for which AutoZone did not have the source code ... and SCO claims rights to that code. The same page of the Report also says that AutoZone thought it had not used either Compx or Decompx programs since 2003. They copied it onto all the servers, used it from 2000 to 2003, they originally guessed, without any way of viewing the code, found out some servers still had the two files on them after 2003, and bingo, a crime of great magnitude from two files that they licensed from someone else, and likely had no reason to think were infringing anybody's code. ... some of the programs they found when they went looking in discovery don't even run in Linux, so they couldn't use them, even though they were still there on the servers. Some were pre-Y2K. In short, stuff nobody even knew was still there."
In the SCO v IBM case, Judge Kimball was astonished to find, after reviewing the sealed and public documents, that, after two years of claiming mountains of code infringement in Linux, SCOG was unable to find enough evidence to show a sufficient disputed fact to require IBM's CC10 claim to be heard by a jury. I don't find astonishing the fact that SCOG could not find enough evidence to justify filing a preliminary injunction motion against SCOG.
Typo: should be "against Autozone".