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SCO's CEO: 2Q Loss Won't Halt Battle Against IBM

The SCO Group posted a nearly $15 million loss in its second fiscal quarter amid a freeze in SCOsource licensing, but company executives vowed that SCO has enough cash to continue its intellectual-property litigation against IBM for several years.

The embattled Lindon, Utah-based company reported revenue of $10.1 million and a loss of $14.95 million, or $1.06 per share, for its second quarter ended April 30. The negative results stemmed, in part, from the exchange of Series A-1 convertible preferred stock that generated $13 million for investor BayStar Capital, according to SCO.

For the same quarter last year, SCO posted a profit of $4.5 million, or 33 cents per share, on revenue of $21 million. The company said the sales decrease primarily was due to a slump in SCOsource licensing revenue, which plummeted to $11,000 last quarter. SCOsource benefited significantly last year after it launched a Unix source-code licensing program and signed on deep-pocketed licensees such as Microsoft.

In a conference call on Thursday, SCO CEO Darl McBride and newly appointed CFO Bert Young said the company is in ample financial shape to fund its legal fight against IBM, Novell, Red Hat and customers AutoZone and Daimler Chrysler. They noted that SCO has no debt, a sizable war chest and predictable quarterly Unix product revenue.

During the quarter, SCO structured a deal that paid investor BayStar Capital but left $48 million in SCO's coffers. SCO spent roughly $4.4 million last quarter on legal expenses, and it expects to burn $3 million to $5 million each quarter in legal costs related to its battle to protect its Unix intellectual property, Young said.

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