The SCO Group Reports Third Quarter Results; Operating Results Exceed Expectations

Aug 28, 2002, 01:00 ET from The SCO Group

    LINDON, Utah, Aug. 28 /PRNewswire/ -- The SCO Group (SCO), a
 Caldera company (Nasdaq:   CALD), today reported higher than projected revenue
 of $15.4 million for the three months ended July 31, 2002.
     The Company reported a net loss for the three months ended July 31, 2002
 of $4.5 million, or $0.35 per common share.  Excluding non-cash expenses of
 $0.7 million and a restructuring charge of $1.2 million, the net loss for the
 quarter would have been $2.6 million, or $0.20 per common share.  This
 compares to a net loss of $6.6 million, or $0.47 per common share, for the
 prior quarter ended April 30, 2002, which included non-cash expenses of
 $2.2 million, and compares to a net loss of $18.8 million, or $1.35 per common
 share, for the comparable quarter of the prior fiscal year, which included
 non-cash expenses of $9.8 million.
     "In our continuing drive toward profitability, the Company is beginning to
 see positive financial improvement from prior periods," said Darl McBride,
 president and CEO.  "Revenue in the Americas was stronger than the previous
 quarter for the first time in the last five quarters and worldwide revenue was
 level with last quarter.  Our deferred revenue increased by $3.6 million, from
 the prior quarter, reflecting continued strength in our bookings and future
 business," continued McBride.  "On the operations side, our gross margin
 increased from 65 percent to 74 percent and at the same time we reduced world-
 wide quarterly operating costs by an additional 6 percent compared to last
 quarter." said McBride.
     "We have reduced the Company's outstanding shares by 30 percent through
 the purchase of 4.3 million shares held by two investors.  The removal of this
 stock overhang positions the Company to raise additional equity.  In addition,
 we are debt-free and positioned to take advantage of expansion opportunities,"
 continued McBride.
     The Company reported a net loss for the nine months ended July 31, 2002 of
 $22.1 million, or $1.58 per common share, compared to a net loss of
 $40.3 million, or $3.58 per common share, for the comparable nine-month period
 of the prior fiscal year.  Results for the nine-month period ended July 31,
 2002, are not directly comparable to the results for the nine-month period of
 the prior fiscal year because of the significant changes in the operations of
 the Company as a result of a major acquisition completed in the third quarter
 of 2001.
     Financial outlook
     The following statements are based on current expectations.  These
 statements are forward looking and actual results may differ materially.  See
 the discussion of certain risks at the end of this release.
     --  For the fourth quarter of fiscal 2002 ending October 31, 2002, we
         expect revenue to be $14 to $16 million.
     --  We expect a slight increase in gross margin from 74 to 76 percent as a
         result of continued efficiencies.
     --  We expect a reduction in ongoing operating expenses of 2 to 3 percent
         as a result of restructuring actions taken in prior quarters of fiscal
     --  For our fiscal year ending October 31, 2002, we expect revenue to be
         $63 to $65 million.
     Conference Call
     As previously announced, the Company will host a conference call at
 5:00 p.m. EDT today, August 28, 2002, to discuss the third quarter results.
 To participate in the teleconference, please call (800) 289-0436, confirmation
 code 562359, approximately five minutes prior to the time stated above.  A
 listen only webcast of the call will be broadcast live with a replay available
 the following day.  The webcast and replay may be accessed from .
     The SCO Group, Inc.
     The SCO Group, formerly called Caldera International (Nasdaq:   CALD),
 provides "Powerful Choices" for businesses through its UNIX, Linux and
 Volution product lines and services.  Based in Lindon, Utah, SCO has
 representation in 82 countries and has 16,000+ resellers worldwide.  SCO
 Global Services provides reliable localized support and services to partners
 and customers.  For more information on SCO products and services, visit .
     Caldera, the Caldera logos, Caldera Volution, OpenLinux, SCO and the
 associated SCO logo, SCO OpenServer, TeamSCO, SCOx and SCObiz are trademarks
 or registered trademarks of The SCO Group in the U.S. and other countries.
 UNIX and UnixWare, used under an exclusive license, are registered trademarks
 of The Open Group in the U.S. and other countries.  Linux is a registered
 trademark of Linus Torvalds.  All other brand or product names are or may be
 trademarks of, and are used to identify products or services of, their
 respective owners.
     Forward Looking Statements
     The statements set forth above include forward-looking statements that
 involve risks and uncertainties.  The Company wishes to advise readers that a
 number of important factors could cause actual results to differ materially
 from those projected in the forward-looking statements.  These factors include
 the acceptance of the Company's new branding efforts; the ability of the
 Company to successfully roll out its new services and solutions to service
 providers in its existing channels; the acceptance of such offerings by
 existing service providers and others; the acceptance of new products and
 services by the ultimate customers; the ability of the Company to successfully
 meet its revenue projections, which are based in part, on the continued
 acceptance in the marketplace of historical products; the ability of the
 Company to continue to manage its cost reductions without adversely affecting
 customer service and employee productivity; the ability of recently introduced
 and new products to operate as designed, including compatibility with various
 platforms and the absence of other defects; the Company's ability to compete
 effectively with other solutions providers; the Company's reliance on
 developers in the open source community; new and changing technologies and
 customer acceptance of those technologies; failure of our brand to achieve the
 broad recognition necessary to succeed; unenforceability of the GNU general
 public license and other Open Source licenses; our reliance on third party
 developers of components of our software offerings; and claims of infringement
 of third-party intellectual property rights.  These and other factors, which
 could cause actual results to differ materially, are discussed in more detail
 in the Company's filings with the Securities and Exchange Commission.
                                   (in thousands)
                                                      July 31,     October 31,
                                                        2002           2001
     Cash and cash equivalents                         $9,609        $22,435
     Available-for-sale securities                         --          5,943
     Accounts receivable, net                          10,954         16,742
     Other current assets                               3,780          3,438
       Total current assets                            24,343         48,558
     Property and equipment, net                        2,571          6,116
     Goodwill and intangibles                          12,041         17,686
     Other assets                                       1,010          2,499
       Total assets                                   $39,965        $74,859
     Current liabilities                               28,273         34,157
     Long-term liabilities                              2,376          5,925
     Minority interest                                    150            173
     Stockholders' equity                               9,166         34,604
       Total liabilities and stockholders' equity     $39,965        $74,859
                       (in thousands, except per share data)
                              Three Months Ended         Nine Months Ended
                                   July 31,                   July 31,
                              2002          2001         2002          2001
     Revenue                $15,384       $18,857      $48,773       $21,509
     Cost of revenue          3,987         6,005       14,955         8,989
       Gross margin          11,397        12,852       33,818        12,520
     Sales and marketing      6,908        13,029       22,944        23,408
     Research and
      development             4,284         6,662       13,810        10,757
     General and
      administrative          2,260         2,691        7,507         5,772
     Write-downs of
      investments                --         2,600        1,180         6,910
     Amortization of
      intangibles               785         5,332        2,404         5,332
     Restructuring charges    1,245            --        6,506            --
     Non-cash compensation      (89)          391          415           982
     Other                       --         1,500           --         2,102
       Total operating
        expenses             15,393        32,205       54,766        55,263
     Loss from operations    (3,996)      (19,353)     (20,948)      (42,743)
     Equity loss in
      affiliate                  --            --           --          (648)
     Other income (expense),
      net                      (301)          769         (769)        3,358
     Loss before
      income taxes           (4,297)      (18,584)     (21,717)      (40,033)
     Provision for
      income taxes             (214)         (241)        (431)         (290)
     Net loss               $(4,511)     $(18,825)    $(22,148)     $(40,323)
     Basic and diluted
      net loss per
      common share           $(0.35)       $(1.35)      $(1.58)       $(3.58)
     Weighted average
      common shares
      outstanding            12,714        13,941       14,031        11,269
                     MAKE YOUR OPINION COUNT -  Click Here