SCO Reports Fiscal 2001 First Quarter Results

Jan 30, 2001, 00:00 ET from Santa Cruz Operations, Inc.

    SANTA CRUZ, Calif., Jan. 30 /PRNewswire/ -- The Santa Cruz Operation, Inc.
 (Nasdaq:   SCOC), today announced fiscal first quarter financial results for the
 period ending December 31, 2000.
     (Photo: )
     Revenues for the first fiscal quarter of 2001 were $26,455,000 compared
 with $32,797,000 for the fourth fiscal quarter of 2000. The net loss for the
 first fiscal quarter was $7,897,000 or $0.20 per fully diluted share, compared
 with a net loss of $10,162,000, or $0.28 per fully diluted share
 (excluding one-time charges for restructuring and the reduction of deferred
 tax assets) reported for the fourth fiscal quarter of 2000.
     First quarter 2001 revenues declined on an annual basis when compared to
 revenues of $53,653,000 for the same quarter last year.  First fiscal quarter
 losses can be compared to a profit of $2,875,000 and $.07 per fully diluted
 share in the same period in 2000.
     The company also reported that it is on track to close its pending sale of
 the Server Software and Professional Services Divisions to Caldera Systems
 during the second quarter of fiscal 2001.
     Doug Michels, President and CEO of SCO commented, "As with others in our
 industry, the results for the quarter were directly impacted by the reduction
 in IT investment by companies for application server software and service
 initiatives.  Furthermore, our continued focus on the transaction with Caldera
 is having an undeniable impact on our business, employees and customers.  We
 are confident the completion of this transaction will be a significant
 positive event, allowing the company to re-establish momentum and growth."
     First fiscal quarter revenues for the Tarantella Division were $3,178,000
 compared with fourth fiscal quarter 2000 revenues of $4,315,000.  The
 operating loss for the division was $6,524,000 compared with $5,960,000 in the
 prior quarter.
     Tarantella continued to grow its customer base, adding 58 new accounts
 during the quarter.  New account sales are, for the most part, pilot program
 or initial quantity orders with potential for future larger deployment.
 Recent large enterprise wins included Safeway, Oracle Corporation, Detroit
 Edison, Bank of America, Caterpillar, Credit Suisse First Boston, Pemex,
 Schlumberger, GE Access, Novell, NTT and Hitachi.
     Additionally, many existing customers expanded their deployment of
 Tarantella including ABN AMRO Bank, Shell, Deutsche Telekom and MCI WorldCom.
 Tarantella also continued to develop key partnerships with industry leaders
 including Sun Microsystems, Compaq, IBM, Computer Associates and Nortel
     Mike Orr, president of the Tarantella Division commented, "While revenue
 figures for the division were disappointing, we are pleased with the momentum
 we are experiencing as we continue to expand our customer base.
 Year-over-year quarterly Tarantella product license revenues grew 79%, support
 revenues grew by 114%, while Vision Family licenses declined by 54%.  This
 decline in the older Vision Family products tends to mask the growth rate of
 the Tarantella product line."
     Orr continued, "This quarter's results reflect the fluctuation we
 anticipate in Tarantella revenues based on the variable deployment schedules
 of our customers.  While revenues were down sequentially for the division, it
 is not an accurate reflection of quarter over quarter growth, as revenues for
 the fiscal fourth quarter included a very large order from one of our major
 customers.  As we continue filling the pipeline with enterprise customers in
 pilot programs, we expect to see variations in the timing of larger
 deployments, leading to significant fluctuations in sequential revenue growth
 rates going forward.  However, we are currently taking actions that we believe
 will help speed up the deployment cycle."
     First fiscal quarter revenues for the Server Software Division were
 $23,026,000 compared to $28,304,000 in revenues for fourth fiscal quarter
 2000.  The division's revenue included $10,790,000 from sales of the company's
 SCO OpenServer product.  The division's net loss for the quarter was $210,000
 compared to a net loss of $2,521,000 in fiscal fourth quarter 2000.
     David McCrabb, president of the Server Software Division commented,
 "Although division revenues were down, we are encouraged by the continued
 growth in sales of our clustering platforms this quarter and by the
 improvement in operating results.  Due to the expense reduction initiatives
 put in place last quarter, we achieved near break-even results for the
     Professional Services Division first fiscal quarter revenues were $861,000
 compared to fiscal fourth quarter revenues of $1,181,000.  The division's net
 loss for the quarter was $930,000 compared to a net loss of $833,000 reported
 for the prior quarter.
     Jim Wilt, president of the Professional Services Division said, "While
 revenues of the division slowed, we anticipate renewed momentum as Linux and
 Tarantella engagements become a larger part of our services business."
     Michels stated, "We made significant efforts this quarter to lower
 expenses and are fully committed to returning the company to profitability.
 We are fine-tuning each division and positioning the company for the future.
 Our balance sheet, which includes over $13 million in cash, provides us with
 sufficient resources to continue focusing our efforts on growing the
 Tarantella business."
     Conference Call
     SCO will hold a conference call to discuss fiscal first quarter 2001
 financial results, as well as provide an update on the company, at 1:45 p.m.
 PST today.
     The conference call may be accessed in listen-only mode by dialing
 719-457-2630 and will also be broadcast live over the Internet.  Interested
 parties can obtain access through the SCO website at
 or at  Please access the website at least fifteen
 minutes prior to the start of the call to register, download, and install any
 necessary audio software.
     A replay of the call will be available via the web at, beginning at approximately 4:00 p.m. on January 30th,
 until February 12th.
     For SCO Investors
     This release contains forward-looking statements, including statements
 relating to SCO's expectations for market share growth, demand for its
 products, technologies and services, generating momentum in its customer base,
 stability of the sales channel, and the pending sale of SCO's Server Software
 and Professional Services divisions to Caldera Systems, Inc., which are based
 on current expectations, that involve risks and uncertainties.  SCO's actual
 results may differ materially from the results discussed in these
 forward-looking statements. Factors that may contribute to such a difference
 include, but are not limited to, uncertainty in domestic and international
 markets, changes in customer implementation plans, the ability to reduce
 expenses, risks of dependence upon third-party suppliers, impact and success
 of industry partnerships, conclusion or success of strategic opportunities,
 timely availability of products, market acceptance of new products, including
 internet-related products, the impact of competitive products, general market
 conditions including SCO's ability to compete in the highly competitive and
 rapidly changing marketplace, and other risks detailed from time to time in
 SCO's SEC filings, including forms 10-Q and 10-K.  SCO disclaims any intention
 or obligation to publicly update or revise any forward-looking statements,
 whether as a result of events or circumstances after the date hereof or to
 reflect the occurrence of unanticipated events.
     About The Santa Cruz Operation, Inc.
     With headquarters in Santa Cruz, CA, The Santa Cruz Operation, Inc. is
 comprised of three independent divisions -- Tarantella, Inc., the Server
 Software Division, and the Professional Services Division.  The Server
 Software Division is a leading provider of UNIX server operating systems.
 Tarantella, Inc. promotes a range of software technologies and products that
 web-enable any application instantly, for access by users anywhere.  The
 Professional Services Division helps organizations create and deploy
 personalized IT strategies.  The three divisions sell and support their
 products and services through a worldwide network of distributors, resellers,
 systems integrators, and OEMs.  For more information, visit SCO's home page at
     NOTE:  The Santa Cruz Operation, SCO, Tarantella, and SCO OpenServer are
 trademarks or registered trademarks of The Santa Cruz Operation, Inc. in the
 USA and other countries.  UNIX is a registered trademark of The Open Group in
 the US and other countries.  Linux is a registered trademark of Linus Torvalds
 in the U.S. and other countries.  All other brand or product names are or may
 be trademarks of, and are used to identify products or services of, their
 respective owners
                                                   December 31,  September 30,
     CONSOLIDATED BALANCE SHEETS                       2000            2000
     (In thousands)                                 (Unaudited)
     Current assets:
       Cash and cash equivalents                      $10,009        $20,879
       Short-term investments                           3,100          5,567
       Receivables, net                                22,155         24,269
       Available-for-sale equity securities             5,313          7,119
       Other current assets                             6,001          4,358
         Total current assets                          46,578         62,192
     Property and equipment, net                        7,906          9,012
     Purchased software and technology
      licenses, net                                     5,030          5,830
     Other assets                                       3,692          5,168
           Total assets                               $63,206        $82,202
     Liabilities and Shareholders' Equity
     Current liabilities:
       Trade accounts payable                          $4,205         $5,521
       Royalties payable                                2,362          4,530
       Income taxes payable                             2,178          1,964
       Accrued restructuring charges                    2,903          5,964
       Accrued expenses and other current
        liabilities                                    19,795         20,225
       Deferred revenues                                6,174          7,334
         Total current liabilities                     37,617         45,538
     Long-term lease obligations                          346            545
     Long-term deferred revenues                        1,626          1,397
     Other long-term liabilities                        3,516          3,520
         Total long-term liabilities                    5,488          5,462
     Shareholders' Equity
       Common stock, no par value, net,
        authorized 100,000 shares
         Issued and outstanding 39,445
          and 39,346 shares                           118,947        118,940
       Accumulated other comprehensive income           2,275          5,486
       Accumulated deficit                           (101,121)       (93,224)
         Total shareholders' equity                    20,101         31,202
           Total liabilities and
            shareholders' equity                      $63,206        $82,202
     (In thousands, except amounts per share)
                                                         Three Months Ended
                                                            December 31,
                                                        2000           1999
     Net revenues
       Licenses                                       $22,861        $49,438
       Services                                         3,594          4,215
         Total net revenues                            26,455         53,653
     Cost of revenues
       Licenses                                         3,479          6,692
       Services                                         3,602          5,140
         Total cost of revenues                         7,081         11,832
         Gross margin                                  19,374         41,821
     Operating expenses:
       Research and development                         6,432         10,578
       Sales and marketing                             16,331         25,299
       General and administrative                       4,267          3,836
         Total operating expenses                      27,030         39,713
         Operating income (loss)                       (7,656)         2,108
     Other income (expense):
       Interest income, net                               194            600
       Other income (expense), net                        181            837
         Income (loss) before income taxes             (7,281)         3,545
       Income taxes                                       616            670
         Net income (loss)                             (7,897)         2,875
     Other comprehensive income (loss),
      net of tax
       Unrealized gain (loss) on
        available-for-sale equity securities           (3,158)        55,863
       Foreign currency translation adjustment            (53)             1
         Comprehensive income (loss)                 $(11,108)       $58,739
         Earnings (loss) per share:
           Basic                                       $(0.20)         $0.08
           Diluted                                     $(0.20)         $0.07
         Shares used in earnings (loss)
          per share calculation:
           Basic                                       39,443         34,713
           Diluted                                     39,443         41,258
     (In thousands, except earnings per share)
                                                        Three Months Ended
                                                     Dec. 31,       Sept. 30,
                                                       2000           2000
     Net revenues
       Licenses                                       $22,861        $28,767
       Services                                         3,594          4,030
         Total net revenues                            26,455         32,797
     Cost of revenues
       Licenses                                         3,479          5,707
       Services                                         3,602          4,320
         Total cost of revenues                         7,081         10,027
         Gross margin                                  19,374         22,770
     Operating expenses:
       Research and development                         6,432          7,931
       Sales and marketing                             16,331         19,322
       General and administrative                       4,267          4,835
       Restructuring charges                               --          4,796
         Total operating expenses                      27,030         36,884
         Operating loss                                (7,656)       (14,114)
     Other income (expense):
       Interest income, net                               194             79
       Other expense, net                                 181           (758)
         Loss before income taxes                      (7,281)       (14,793)
       Income taxes                                       616          5,986
         Net loss                                      (7,897)       (20,779)
     Other comprehensive income (loss), net of tax
       Unrealized gain (loss) on available-for-sale
        equity securities                              (3,158)           201
       Foreign currency translation adjustment            (53)          (235)
         Comprehensive income                        $(11,108)      $(20,813)
         Earnings (loss) per share:
           Basic                                       $(0.20)        $(0.56)
           Diluted                                     $(0.20)        $(0.56)
         Shares used in earnings (loss) per share
           Basic                                       39,443         36,789
           Diluted                                     39,443         36,789

SOURCE Santa Cruz Operations, Inc.