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SCO posts Q2 Loss, Gets $11k from Linux
Paul Hands sent us linkage to SCOs Q2 Financials. "The highlights are that SCOX only collected $11k (yes, K) for that much-discussed license for EV1 and other Licensees. Cost of that $11k was well over $4M.
Overall, revenue was just over $10M, and they made a net loss applicable to common stockholders of $14,959,000, or $1.06 per diluted common share." Update According to the SCO conference call, this isn't accurate.. their Linux extortion income will be listed in the Q3 financials.
<quote> a charge of $2,139,000 related to the impairment of goodwill and intangible assets </qoute>
I'm old enough to remember when discussions on Slashdot were well informed.
It should not take too many more quarters like this to put an end to this nonsense.
From a similar article
"A legal victory looks highly unlikely, and even if a decision went SCO's way, the probable remedy would not be money for SCO, but a rewrite for Linux, something the open-source community would accomplish in the blink of an eye."
The listing appears to be part of an effort by domestic and foreign brokers to circumvent recent National Association of Securities Dealers (NASD) and U.S. Securities and Exchange Commission (SEC) restrictions against so called "naked short selling." Naked short selling involves groups of people working together to manipulate the market by selling fictitious shares of stock in an effort to force a company's share price to go down. Not that I care.
By listing the Company's common stock on the Exchange, market manipulators sought to benefit from an "arbitrage" loophole that none of the present regulations was designed to close.
End up in a cell block with Worldcom and Enron execs? Last I hear, they were still living in their mansions. I'd like to go to jail if that is the kind of cell block I get.
On that note, I can certainly see why SCO took the gamble it did. The company was going to be bankrupt soon and realized that it had just a very small chance of winning any Linux suit. So if they didn't sue, they would be bankrupt for sure in 2-3 years. If they DID file suit, they at least had a chance they would win (albeit small) and save themselves from bankrupcy.... Under this view of things, they actually didn't take ANY risk since it was inevitable they would have gone under if they hadn't filed suit... Just something to think about (though I still think SCO is SCum)
The stock has been around $5 ± 0.50 for weeks. You can't short a NASDAQ listed stock when the price is below $5, so the bears drop out at that point. Trading volume has been down for weeks. SCO's concern with being listed on some additional exchanges may be that they have different rules on short positions, allowing shorting at lower price points.
The full numbers from this quarter aren't out yet, so it's hard to figure out when they run out of cash. It looks like they have three to six quarters of cash left at their current burn rate, but that's a rough estimate. Unless they get new financing, it looks like they won't make it to the IBM trial date in 2005.
At this point, the remaining stockholders who think SCO has a case against IBM might well ask why SCO wants additional delay. SCO can't afford much more delay.
October 2003, stock hovers at a high of $22.
Now, stock is at $4 and from the looks of things could easily drop back down to $2.
Hype over. The put up or shut up phase where people assumed they had a case is over. They must have known there was a point where the stock price couldn't be inflated any more by innuendo and "maybe sorta" proof, so I'm wondering why they'd continue down this path?
-- The unsig...
Assuming the ruling goes against them, you know they'll appeal. Even if it doesn't, IBM will.
I don't think they have the money to follow through all the appeals.
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I am very happy to read that SCO has made such a large net loss. This is not because support for Linux as much as it is because I do not support the type of business practice employed by SCO.
I strongly believe that companies have a duty not only to their owners, but also to their customers, suppliers, and even to their competitors. The last one, the duty to competitors, is a duty to compete based on a better products and services, better marketing, better pricing, a better overall customer experience, etc.
I think that, while litigation is sometimes necessary, most issues can be settled outside of the court system in a mutually beneficial way, or at least in a way that minimizes the damages to all parties involved. Further, litigation and other legal actions (lobbying for legislation, etc.) should not be employed as a source of profit for a company, but only to solve legitimate problems.
In the case of SCO, I think they have thrown all good business practices out the window, while embracing litigation as a potential source of profit. Essentially, instead of elevating themselves by making sound decisions and consistently improving themselves, they are trying to become elevated by pushing others down. Kind of like the "everything is relative" argument - if you push someone down, then you could say that you have elevated yourself even though you stayed in the same place. This is what SCO is trying to do, and it is not beneficial to anybody except, if they manage to pull it off, themselves. This is a very egoistic and self centered company with no desire to make anything of value. And companies like this should not be supported.
For those reasons, I am glad that SCO had these losses, and I hope that investors pull their investments, new investors don't buy SCO stock, and potential customers go elsewhere. This evil company should not be supported by anybody.
Not to mention that I strongly believe that there is no legal issue of any SCO code being copied into other software. In fact, I believe quite the opposite: Either:
Tell that to the ex-Enron offiers.
1f u c4n r34d th1s u r34lly n33d t0 g37 l41d
http://biz.yahoo.com/fool/040610/1086881820_2.html
All you touch and all you see is all your life will ever be
Doesn't mean the appeals will die. There are any number of firms that are willing to pick up dead companies for next to nothing only to continue their legistlation in the hopes that a small portion of these investments will pay off.
I expect some version of SCO's cases will be in the system for 5+ years.
It is more productive to voice thoughtful opinions (reply) than to judge (moderate) others.
helping keep Linux in the news.
Maybe, but it hasn't exactly been positive news. People who didn't know much about Linux and heard about this whole SCO debacle are probably even LESS likely to want to switch over now.
Obviously, anyone who has had the situation explained to them (and actually understands the explanation) will think differently, but the average Joe User will see the uncertain history/future as another reason not to switch over. "Why should I switch if sometime in the future I may have to pay $600 because it turns out that someone owns it?!"
I guess it would have been harder for him to have told his father this:
"We went out one day and noticed that no one was buying our cows because everyone was getting free cows. So we went over to where the free cows were and accused the free cow people of stealing our cows because they had horns and udders just like our cows. We want $699 per cow. Then it turned out that the cows aren't related but we had a showdown with the IBM boys because they had bought our cows in the past and had made bells for them and they were putting similar bells on the free cows. In the meantime it turns out that our cows don't actually belong to us, but to Mr Novell, who pays us to look after them -- it's as simple as that."
All the while this CEO got paid a huge salary:
Management blamed the slow sales on a "lack of SCOsource licensing revenue." SCOsource is the Linux users' shakedown program. Apparently, no one is paying up. It took in $11,000 last quarter. That's not a typo. President and CEO Darl McBride paid more lip service to "increasing shareholder value," but you really have to wonder about the viability of his vision when his firm's most engrossing initiative brings in less money than the guys who mow lawns in my neighborhood. By the way, McBride was paid more than $1 million last year -- most of it in cash -- to preside over this impending disaster.
It really is sickening. And there seems to be no hope in sight for regulatory reform in this area, when public companies can perform goofy shit like this with impunity.
It's rumoured that BlueStar made the same point to SCO. I think they were right. SCO's conventional business should be in "harvest" mode right now.
Does anyone know of a reason that SCO should be investing money in R&D?
...and even if we can't, we can still torture them.
Well the average Joe User wasn't likely to switch before the SCO debacle anyway. Joe just uses whatever came on the PC. But now it is more likely that in the future Joe will use the Linux that comes on his WalMart PC along with OpenOffice and Firefox or Opera. Why more likely? Only because many basic apps have good viable free alternatives to MS apps. Joe user just wants to do what he wants to do, so if a box with Linux is say $100 cheaper and does what he wants, then he'll probably buy it. The only thing holding him back in the past may have been gaming, but heck, Joe probably does all of his gaming on a console now anyway because they are cheap and easy to use.
So Joe's heard of Linux now, but that doesn't matter. The important guy is Corporate Mike who's trying to cut costs and increase reliability. That's the guy MS is worried about keeping.
To the making of books there is no end, so let's get started
I'd say it was headed for 0.
Friends don't help friends install M$ junk.
If you buy their UNIX or Linux Product later on down the road they will read something in a license agreement and file suit against you like they did with IBM, Autozone and Chrysler. Their legal actions are similar to Ford Motor company suing people that buy their SUV's for painting their cars or repairing a tail light. Business by litigation is always bad for corporations that need customers to buy their product to survive.
There would be quite a few others there, but MS is the only OS and/or systems company that can't live in a world of FOSS. Sun would reluctantly live in a FOSS world, even if they'd rather have the old world back. I think it is the 'F' in FOSS that a few companies would rather live without, even if they do lend some support to OSS.
Some ISVs and other Microsoft partners probably have just as much to lose as MS does if the world goes entirely FOSS.
Apparently BayStar wanted SCO to get out of the Unix business and into the lawsuit business. But what if they did the opposite? What if they stopped forking money over to lawyers and concentrated on developing and selling Unix? They still had 10M in revenue from this quarter. They only spent 1.9M to make that revenue plus another 2.8M in R&D. That's a potential operating profit of 5.3M. There are many small businesses that would be glad to make 5.3M every quarter. The IP-licensing side of their business with all their lawsuits cost SCO 4.4M (see the line about Cost of SCOsource licensing revenue) and only paid back 11K. I think you can see where the money is hemorrhaging.
I was never a SCO Unix user, but I understand it was (at one time) a repectable unix back in the day and I don't see why it can't be again with a quarterly R&D bugdet of 2.8M. If I was a serious shareholder (not a speculator) interested in growing the business, I would want to know why they don't stop wasting money on this longshot lawsuit crapshoot and start concentrating on what they themselves describe as their "core" business.
It'd be even better if they could go after those that funded SCO, instead of their puppet management.
Better targets for IBM are Canopy and Microsoft. Maybe Sun, but that'd open up a whole other can of worms. I doubt they'd even want to touch a MS case for that matter, although they might not mind digging up evidence for the anti-trust folks to use.
Can someone please confirm that this is the Darl McBride of SCO (what is the first letter of Darl's middle name, for starters)? For more than one reason, I believe that if it really were him, he wouldn't have his number listed (remember, the guy hires an ontourage of body guards to protect him against 'militant linux extremists' whenever he leaves his little enclave). If slashdot readers ruthlessly prank this number without confirming who it is they are really calling, its likely to backfire when open source supporters are portrayed as unjust lunatics.
And if they guy isn't the Darl Mcbride, hasn't he suffered enough already by sharing the same name?
I'm no accountant, so take all this with a grain of salt, but -- in the US, advertising costs must be expensed, not capitalized. (International practice is definitely different regarding capitalization of research, for example, and advertising may be similar where you are.)
You're both kind of right, but his explanation that goodwill accounts for the difference between acquisition cost and fair value is much closer to the definition under US GAAP than your model of companies continuously changing their balance sheets to reflect their popularity. Again, internationally YMMV.
(So no -- it's not like SCO's accountants said "We suck, everyone hates us, revise the books!")
What I'm listening to now on Pandora...
"Goodwill is always immaterial, it's the reputation of the company and its products, value of its trademarks, such things, expressed in money."
Wrong! What you are thinking of appears under the category, "intangible assets", on the balance sheet.
Futhermore, these are not always immaterial. Think of what people would pay for a high tech company's customer list! Think of what the copyrighted or trademarked words "Walt Disney" or "Mickey Mouse" would sell for, if they were for sale!
Everybody connected to hich tech companies should know the true meaning of "goodwill". That's what appears on a buyer's balance when he buys a worthless fad company for $10 billion.
And that's how much of a writedown he must take when the fad passes!
Yes, but his larger point is correct. Goodwill is generated by the mismatch between book value and a transaction cost. You can't (as the person he was responding to contended) keep increasing the goodwill value of the acquired business whenever you think it's worth more.
What I'm listening to now on Pandora...
I think the intent of your argument is correct, but I don't think it's a very good example.
The established customer base would normally be part of the purchased corporate valuation, as the value of an established business includes it's reputation, customer base, and projected established revenues. The value of the physical assets is often trivial compared to the established market presence.
I do not fail; I succeed at finding out what does not work.
>It's not that accounting is odd or a black art, it's that you don't understand that every dollar has to be accounted for and properly categorized.
I submit, however, that modern accounting does defy common sense. "Depreciating goodwill like any other asset"...
Good Lord. Accountants have invented their own laws of time and space. I found out the other day that you can depreciate an appreciating asset.
I wouldn't call accounting a black art exactly... it's more a series of tricks and diversions designed to legally conform to (while still evading) a badly designed tax code.