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| SCO's Quarterly Report is Online |
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Monday, September 15 2003 @ 07:46 PM EDT
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SCO's new 10Q has been filed with the SEC, so dig in, everyone.
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| Authored by: Anonymous on Monday, September 15 2003 @ 08:07 PM EDT |
SCO claims "goodwill" as an intangible asset.
Too bad they aren't required to account for "illwill" as an
intangible liability.
:D
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| Authored by: Anonymous on Monday, September 15 2003 @ 08:34 PM EDT |
From 10-Q
On or about September 15, 2003, the Company filed a motion to dismiss the Red
Hat complaint. The motion to dismiss asserts that Red Hat lacks standing and
that no case or controversy exists with respect to the claims seeking a
declaratory judgment of non-infringement. The motion to dismiss further asserts
that Red Hat’s claims under the Lanham Act and related state laws are
barred by the First Amendment to the U.S. Constitution and the common law
privilege of judicial immunity.
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| Authored by: demona on Monday, September 15 2003 @ 08:37 PM EDT |
| Trying
To Give SCO Money, Take II: Success (sort of)
Excerpt:
"To
recap, about a week and a half ago, I posted a short letter describing some woes
in trying to give the Santa Cruz Operation money for a Linux license. After all,
who wants to be in violation of copyright?
"(To placate one well-placed
criticism of that letter, and to correct a light statement of mine that my code
was without copyright: Linux is not without copyright. It is copyrighted under
the GNU General Public License, which is very different than the public
domain.)
"Since that letter, I have seen news stories that SCO has announced
available licensing plans to the general public. Hot Damn! This is my
chance to get me some of them licenses. Roughly a week after those news stories,
I had still not received a phone call, so today it was time to
followup with
sales..."
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| Authored by: Anonymous on Monday, September 15 2003 @ 08:40 PM EDT |
"We are informed that participants in the Linux industry have attempted to
influence participants in the markets in which we sell our products to reduce or
eliminate the amount of our products and services that they purchase. They have
been somewhat successful in those efforts and will likely continue."[ Reply to This | # ]
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| Authored by: Anonymous on Monday, September 15 2003 @ 08:52 PM EDT |
| From the filing, in the Legal Proceedings item:
IPO Class Action
Matter
We are an issuer defendant in a series of class action
lawsuits
filed in the United States District Court for the
Southern District of New
York, involving over 300 issuers
that have been consolidated under In re
Initial Public
Offering Securities Litigation, 21 MC 92
(SAS).
It goes on to mention that SCO is planning to settle with
the plaintiffs. From an earlier section, it appears that this has to deal with
accused "improprieties" in the conduct of SCO's underwriters during its IPO. I
hadn't heard of this suit earlier. Is it related to the Linux fray? How would
one go about looking up the case in question to find out the details? [ Reply to This | # ]
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| Authored by: Upholder on Monday, September 15 2003 @ 09:01 PM EDT |
| Couple of interesting tidbits... My quotes from the 10Q are in italics
From
the section on litigation in the middle of page 14 they say they've filed to
dismiss the Redhat lawsuit:
On or about September 15, 2003, the Company
filed a motion to dismiss the Red Hat complaint. The motion to dismiss asserts
that Red Hat lacks standing and that no case or controversy exists with respect
to the claims seeking a declaratory judgment of non-infringement. The motion to
dismiss further asserts that Red Hat’s claims under the Lanham Act and related
state laws are barred by the First Amendment to the U.S. Constitution and the
common law privilege of judicial immunity.
From the section on
litigation at the bottom of page 15:
The Australian Competition and
Consumer Commission (the “ACCC”) has contacted the Company and requested
information regarding complaints it has received regarding the Company’s
intellectual property claims and the Company’s statements regarding the need for
commercial Linux users to obtain a UNIX license. The Company intends to respond
to the ACCC’s inquiry. The ACCC has notified the Company that it has not made
any decision to pursue the complaints it has received or determined what, if
any, action it will take.
At the end of the litigation section on
page 16 is the best one yet:
The Company is a party to certain other
legal proceedings arising in the ordinary course of business including legal
proceedings arising from its SCOsource initiative. Management believes, after
consultation with legal counsel, that the ultimate outcome of such legal
proceedings will not have a material adverse effect on the Company’s results of
operations or financial position.
"will not have a material adverse
effect" excuse me while I laugh.
Is the "Warrant Agreement with
Consultant" described on page 18 the means of paying for their "data
mining"?:
During the quarter ended July 31, 2003, the Company issued a
warrant to a consultant, as part of an agreement to assist the Company with its
SCOsource licensing initiative. The warrant allows the consultant to acquire
25,000 shares of the Company’s common stock at an exercise price of $8.50
per share for a term of two years from the date of the
agreement.
Love their business model... lay off sales and marketing
people and engineers and sue everyone (oh, and the decline they've experienced
has nothing to do with being a company nobody trusts because of statements like
"Contracts are what you use against people you have a relationship
with"):
During recent quarters, we have experienced a decline in our
product and services revenue primarily attributed to the worldwide economic
slowdown, lower information technology spending and increased competition in the
operating system market. However, we have implemented cost reduction measures
to decrease personnel and excess facilities costs and have significantly reduced
our overall operating expenses. These measures, combined with revenue of
$15,530,000 from our SCOsource licensing initiative, have resulted in the
first two profitable quarters in our history.
And it looks like we
may have found SCO's 2nd 'Linux licensee' (middle of page 22):
In
connection with the payment of $2,500,000 to us by Sun during the quarter
ended July 31, 2003, we granted a warrant to Sun to purchase up to 12,500 shares
of our common stock, for a period of five years, at a price of $1.83 per
share. This warrant was valued at $150,000 using the Black-Scholes
option-pricing model and reduced our licensing revenue for the quarter ended
July 31, 2003 by that amount.
Didn't they say recently that their
core operations were profitable? Here's what they say in the 10Q (bottom of
page 33):
We do not have a history of profitable
operations.
The bottom of page 35:
If we do not prevail in
our action against IBM, or if IBM is successful in its counter claim against us,
our business and results of operations could be materially harmed. The
litigation with IBM and others could be costly, and our costs for legal fees may
be substantial and in excess of amounts we have budgeted for. In addition, we
may experience a decrease in revenue as a result of the loss of sales of Linux
products and initiatives previously undertaken jointly with IBM and others
affiliated with IBM or sympathetic to the Linux movement. We are informed that
participants in the Linux industry have attempted to influence participants in
the markets in which we sell our products to reduce or eliminate the amount of
our products and services that they purchase. They have been somewhat
successful in those efforts and will likely continue. There is also a risk that
the assertion of our intellectual property rights will be negatively viewed by
participants in our marketplace and we may lose support from such participants.
Any of the foregoing could adversely affect our position in the marketplace and
our results of operations.
Yet they said on page 16 the ultimate
outcome of such legal proceedings will not have a material adverse effect on the
Company’s results of operations or financial position. as I noted earlier.
Nothing like contradicting yourself in the same document, is
there?
Page 36:
We are currently negotiating with the various
claimants in Germany over the temporary restraining orders and are evaluating
whether we will appeal the administrative fine. Informal complaints similar to
those raised in Germany have been received from companies in Austria and Poland.
We have responded to those complaints. It is not known if those complainants
will take future action.
In addition to these above-mentioned actions, other
regulators or others in the Linux community may initiate legal actions against
us, all of which may negatively impact our operations or future operating
performance.
So Australia, Austria, Poland and Germany have all at least
looked into shutting SCO up unless they're willing to back up their claims with
proof. Here's hoping that "regulators" such as the SEC get involved, and soon.
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| Authored by: Anonymous on Monday, September 15 2003 @ 09:33 PM EDT |
I don't believe upholder's comments about contradictions on page 14 to 16 is
correct. The "ordinary course of business" type litigation is meant
to mean everything except for the specific cases previously discussed. This is
fairly normal in some SEC filings (see previous SCO 10-Qs for example).
SCO may be making contradictory statements, but this particular one, doesn't, I
believe, fall into that category.
CNET article, with quotes from motion, on SCO's Red Hat filing.
http://news.com.com/2100-7344_3-5077021.html[ Reply to This | # ]
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| Authored by: Anonymous on Monday, September 15 2003 @ 09:56 PM EDT |
| http://www.eweek.com/article2/0,4149,1268310,00.asp [ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 03:03 AM EDT |
| "Research and Development. Research and development expenses were
$2,950,000 for the third quarter of fiscal year 2003 and $4,284,000 for
the third quarter of fiscal year 2002, representing a decrease of
$1,334,000, or 31 percent."
They also laid off people from sales as
well so it's not all bad news.
"In June 6, 2003, we acquired
substantially all the assets of Vultus, Inc. (“Vultus”), a corporation engaged
in the web services interface business. We issued 305,274 shares of our
restricted common stock and assumed liabilities of approximately $215,000 in
connection with this acquisition. We extended employment offers to most of the
Vultus employees, and as a result, will have increased research and development
costs in future periods."
It's interesting that Vultus was in debt when
it was purchased. The other thing that's interesting is how much stock it cost.
At the time, TSG didn't release the details. Actually, at the time I thought
they had paid cash, because if I was buying a company from myself I would want
to be paid with some of that Microsoft cash. ;P
"We recognize revenue
from licensing agreements when a signed contract exists, the fee is fixed and
determinable, collection of the receivable is probable and delivery has
occurred."
Or in the case of Linux licenses, we recognise revenue when
we take someone's credit card number over the phone because we can't show them
the licensing agreement for legal reasons.
"As of July 31, 2003, our
investments balance was approximately $774,000."
TSG has invested
some money in Tarantella but I forget the exact figure. Anyone
remember?
"many of our current and potential competitors have greater
financial and technical resources than we do;"
Wait a minute... I
thought that TSG made Caddilacs where everyone else made bicycles. I guess
since RedHat is 10 times as large as TSG and IBM is 100 times as large, they
probably might have one or two resources...
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 06:44 AM EDT |
Yes, and they went from "no goodwill" in Oct 2002 to about 1 million
bucks in July 2003. Probably Bill Gates has lots of good will towards them[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 07:56 AM EDT |
http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600684464&a
mp;tid=cald&sid=1600684464&mid=42464
Leo is a real bean counter, but the message is fading to the back of the pack.
Reposted for posterity.
I have many years of experience in finance/investment/IT, and after analyzing
SCOX 03Q3 10Q, the only analogy I can make is to .COM era, when valuation was
based on hype more than anything else.
I tried to analyze the financial ratios for SCOX, to determine its “On Going”
concern. If I were to issue an audit report, it would have been an “adverse” or
at best a “qualified” opinion.
Working capital is $6M, and the company is in legal fight with IBM (Multi $B
cash), RHAT with $300M+ cash, and Linux/Unix companies and customers. How could
they sustain paying for these costs?
Revenues, including SCO Source is declining, and according to the management the
decline could get worse. GP for services is only 21%. Deferred Revenue decreased
31%, reflecting the worsening future revenue picture. A/R decreased from $8.6M
to $7.4M.
Selling at $5,930 is near 30% of revenue. R&D at $2.950M had a decline of
31%. $.895M for amortization.
Management quote: “Have resulted in the first two profitable quarters in our
history.” My be the 1st and the last.
Company valuation from $10M (12M+ shares * $.75) has increased to $320M (16M
shares * $20 share price). So, what are the reasons for these high valuations?
The following may give us some clues:
“Center 7 was formed by the Canopy Group, which has ties with companies
experienced at suing the monsters of software. Canopy has a major stake in SCO
Group, which in a suit filed in March charged IBM with infringing on its Unix
copyright in its Linux business. Caldera, the predecessor to the SCO Group, was
paid $250 million in 2000 by Microsoft to settle an antitrust lawsuit, according
to wire reports. The Computer Associates settlement, expected to be approved by
the court in the current quarter, will cost CA about $40 million, or 2 to 3
cents a share. As part of the settlement, no other terms will be disclosed. The
CA case is far smaller than the high-stakes Linux case, in which SCO is seeking
billions of dollars of licensing fees. The Canopy Group, which is majority-owned
by former Novell chief Ray Noorda, owns in excess of 40% of SCO Group's stock,
according to a recent SEC filing. However, the outcome of the Linux case is far
from certain. Last week Big Blue fired back with a countersuit, charging SCO
Group with infringing on at least four patents.”
IMO with a very remote chances of winning the law suit and strong possibility of
imminent insolvency without support of secrete backers, they will be gone before
end of 2004. But since they control more than 65% (40% + 25% options) of shares,
they can keep the prices up, until they sell their shares and options at high
prices.
Regards,
Leo [ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 09:17 AM EDT |
Somebody should pick this up in the press.
100% of the SCO source revenue is Microsoft (about 2/3rds) and Sun (the rest).
Without these two licenses, the company would have a negative cash balance.
The Microsoft connection, in light of the antitrust history, is significant and
should be picked up by the mainstream financial press. Microsoft received
significant warrants for it's investment, now worth several million dollars.
-anon[ Reply to This | # ]
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| Authored by: brenda banks on Tuesday, September 16 2003 @ 10:13 AM EDT |
concerning the sco profit being from M$ and sun
shouldnt the linux community be able to add this to the web site about
complaints against M$
seems to me that since the company has no other income that makes it partially
owned by M$ and would be a penalty showing that they are trying to fight
unfairly against competition?
br3n
---
br3n[ Reply to This | # ]
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| Authored by: BubbaCode on Tuesday, September 16 2003 @ 10:33 AM EDT |
SCO is going on the road with a "world wide" tour to sell SCO
products "city to city"
http://biz.yahoo.com/prnews/030915/lam101_1.html
Of course we are all tempted to show up with LOTS of questions :)
This is however the type of activity I wish SCO DID do instead of waisting its
money and time on silly lawsuits.
I am tempted to go just to find out what some of this SCO stuff looks like in
person, but I am too scared to shop for fear of being put on their license radar
screen.
One consequence that SCO doesn't seem to understand from their actions is how
it will affect the sales of their products. Sure they know there will be a
"backlash" from customers that are put off by their stupid actions,
but did they consider that when they threaten millions, millions will act like
they are threatened and stay the HELL away from SCO in general?
[ Reply to This | # ]
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- SCO's road show - Authored by: mec on Wednesday, September 17 2003 @ 05:01 AM EDT
- SCO's road show - Authored by: Anonymous on Wednesday, September 17 2003 @ 09:53 AM EDT
- SCO's road show - Authored by: Anonymous on Wednesday, September 17 2003 @ 10:25 AM EDT
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 10:34 AM EDT |
"On July 31, 2003, Microsoft exercised an option to acquire expanded
licensing rights. Upon delivery, we expect to recognize additional revenue
related to this option."
Did someone catch this one yet? I suppose
this means that Microsoft has exercised its option to fund the campaign.[ Reply to This | # ]
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| Authored by: Anonymous on Tuesday, September 16 2003 @ 01:34 PM EDT |
An interesting little tidbit about teh DoS attacks.
"As a result of our assertion of our intellectual property rights, we have
been subjected to several denial of service attacks on our website which
prevented web users from accessing our website and doing business with us for a
period of time. If such attacks continue or if our customers and strategic
partners are also subjected to similar attacks, our business and results of
operations could be materially harmed."
I've heard that there is existing prrof that these attacks didn't occur but
that the SCO site was taken down for repairs.
Lying in SEC documents is a big no-no.
Cheers[ Reply to This | # ]
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| Authored by: AdamBaker on Tuesday, September 16 2003 @ 07:15 PM EDT |
Well there's loads of digging needed on the 10Q.
I'm going to try and work out a trend line for products and services revenue
and track down what SCOsource revenue is still due (so far I've found $2.5M
from Sun in Nov and an amount TBD from MS). It would also be good to work out if
there is any SCOsource revenue not attributed to Sun and Msft - I don't think
we can expect to see the unidentified Fortune 500 company until Q4 though.
So far it looks like no stock options for Msft and 210,000 in Q2 and 12,500 in
Q3 for Sun.
The share printing press hasn't been running quite as fast as we thought,
2,251,000 issued since Q3 02 but around 2,500,000 more can be issued to cover
existing options.[ Reply to This | # ]
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| Authored by: mec on Wednesday, September 17 2003 @ 05:28 AM EDT |
Interesting points:
Only SCO Source customers as of July 31 are Microsoft and Sun.
SCO Source is the only profitable part of the company. Everything besides SCO
Source has negative total income. Also, the revenue for everything besides SCO
source are dropping quarter by quarter.
(BTW I see a lot of confusion among non-finance-geeks about
"revenue" versus "income". "Revenue", the
"top line", is everything that the company receives from customers,
and "income", the "bottom line" is what is left over
after the company pays its costs, such as employee salaries and computers and
office space. Revenue is almost always greater than zero, but income can be
positive or negative, depending on how big the costs are).
The stuff about SCO running out of money is true in a literal sense, but not
relevant. As long as Microsoft and Sun are getting benefits from SCO's
attacks, they will keep buying various licenses from SCO.
SCO has been creating a LOT of shares, from 12.7 million shares to 16.2 million
shares in the past year.
SCO laid off 35 people, "approximately 10% of work force", in May,
June, and July.
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