SCO 10-Q shows decline in revenues, except licensing

SCO yesterday released their 10-Q (provided courtesy of Yahoo Finance), which provides investors with an understanding of their performance for the preceding three months and their official outlook on the future. Besides mentioning the $15.5M made from their SCOSource licensing program over the past two quarters and giving specifics on the Microsoft and Sun payments, it mentions Microsoft acquiring "additional rights" in the near future, which sounds a bit ominous.

Here are the interesting facts as I saw them:

  • The Sun and Microsoft licenses (combined) accounted for $8.25M and $7.28M in revenue in the April and July quarters, respectively.
  • Sun's license will require an additional $2.5M payment in November.
  • Sun's license payment in July included warrants to purchase 12,500 shares of SCO stock at $1.83. These under water warrants are worth $19.55/share today or a total of $221,500.
  • "The success of our SCOsource licensing initiative, at least initially, will depend to a great extent on the perceived strength of our intellectual property and contractual claims and our willingness to enforce our rights. Many, particularly those in the open source community, dispute the allegations of infringement that we have made. "
  • SCO has spent about $3.875M bringing in the $15.5M in licensing revenue so far, giving them a 75% gross margin, making the money almost twice as expensive (and half as efficient) as the money they spend on product revenue. (Go figure, if you do something useful in life, it costs less...)
  • SCO has cut their research and development costs by 31%, due primarily to labor cuts (zero innovation = less investment).