Santa Cruz Sentinel from Santa Cruz, California • Page 38

D-6 SANTA CRUZ SENTINEL Thursday, May 29, 2003 BUSINESS Julie Copeland. business editor. 429-2467 market SCO posts first-ever net income 8,793.12 1,563.24 "As the owners of the Unix operating system, we have continued to move down the path of protecting our rights, platform and property," said McBride. "As we've done so, we have been rewarded for that in the marketplace." The increased cash balance has positioned the company for its launch of Dow Jones Industrials Nasdaq composite Standard Poor's 500 Russell 2000 McBRIDE 430.48 The SCO Group WHAT: Provides businesses with UNIX and Linux technology. STOCK PRICE: Wednesday, shares (Nasdaq: SCOX) closed at $6.60, down $2.11 per share.

The 52-week range Is 60 FINANCIALS: Seconck)uarter fiscal 2003, ended April 30, reported net Income of $4.5 million, or $0.33 per diluted share, on revenue of $21.4 million, compared to a net loss of $6.6 million, or $0.47 per diluted share, on revenue of $15.5 million for the same quarter last year. Second-quarter revenue from the company's operating system platforms was $13.1 million, while revenue from its SCOsource licensing Initiative was $8.3 million, first-quarter fiscal 2003 reported a net loss of $724,000, or 6 cents per diluted share, on revenue of $13.5 million. GUIDANCE: SCO expects revenues for its third quarter to be in the $19 million range, two-thirds of which should be from operating systems and the remainder from SCOsource licensing. LEADERSHIP: Darl McBride, president and chief executive officer. HEADQUARTERS: 355 S.

520 West, Suite 100, Llndon, Utah 84042. EMPLOYEES: 340 employees, including 88 based in Santa Cruz. INFORMATION: (801) 7654999; www.sco.com. Still, some Industry analysts say the attention generated by the suit and the resulting increase in cash flow may have been the point of filing the suit. "How many $100 million companies get international press?" said Ted Schadler, an industry analyst with Forrester Research based in Cambridge, Mass.

SCO is a "small company (that is) using scare tactics to raise visibility" while trying to establish itself as a legitimate business licensing intellectual property, he said. And while the earnings result could be an indication that SCO's "position and the resulting headlines have generated some new money," SCO, a proverbial David fighting one or more Goliaths, may be in for a mismatched fight, O'Grady said. "IBM, among others, will fight this as far as it can," said O'Grady. "And given that SCO just turned its first-ever posting of net income, one has to ask whether or not it can see this fight to the end." McBride said he believes "the SCOsource initiative will continue to gain momentum as we pursue enforcement of the company's intellectual property rights." "I know there are a lot of people out there who are upset with us," said McBride. "What we couldn't get comfortable with was how our intellectual property was being abused." By KAREN A.

DAVIS SliNTINEL STAFF WRITER SANTA CRUZ SCO Group Inc. posted second-quarter net income of $4.5 million Wednesday the first positive quarterly financial results the company has seen since it was founded in 1994. Darl McBride, SCO president and chief executive officer, attributed the second-quarter growth to the SCOsource initiative, which garnered the company $8.8 million in cash and added $6.1 million to the gross margin. For the second quarter ended April 30, the company reported net income of $4.5 million on revenue of $21.4 million. During the first quarter, the company reported a net loss of $724,000 on revenue of S13.5 million.

"There are over 6,000 source code licensees of our Unix operating system, and we believe the SCOsource initiative will continue to gain momentum as we pursue enforcement of the company's intellectual property rights," McBride said. In early March, SCO filed a $1 billion lawsuit accusing IBM of giving away trade secrets in its open-source Linux programs by transferring bits of Unix code to Linux. IBM has dismissed the lawsuit as unfounded. A court date has not been set. McBride does not believe the suit against IBM had anything to do with the second-quarter increase.

Instead, it comes from the company's "renewed focus on its Unix platform," he said. SOOx, a Web services strategy, said McBride. "With the spike we've had in our stocks in the past couple of months, we have seen a lot of people want to get on board," said McBride. On May 19, the company announced an agreement by Microsoft Corp. to pay an undisclosed sum for licenses for the Unix operating system.

That announcement sent SCO shares soaring 43 percent to close at $6.80, a far cry above its 52-week low of 60 cents on June 26. The stock hit a 52-week high Wednesday, McBride revealed that another undisclosed major corporation had agreed to pay for licenses. Though Microsoft's licensing gave SCO "a bit of support in its efforts," Industry analyst Stephen O'Grady with RedMonk, based in Hollis, N.H., said, "it's impossible to tell what the impact will be to SCO and the Linux community as a whole, because the charges have yet to be evaluated publicly for merit." Dow finishes higher The Dow Jones industrial average closed up 11.77, or 0.1 percent, at 8,793.12, having gained 179.97 points in the previous session to its best closing level since Jan. 14. The broader market also finished higher.

The Nasdaq composite index rose 6.55, or 0.4 percent, to 1,563.24, after advancing 46.60 points to its highest close since June 5, 2002. The Standard Poor's 500 index rose 1.74, or 0.2 percent, to 953.22, having gained 18.26 points on Tuesday to its best level since Aug. 22, 2002. Light, sweet crude futures on the New York Mercantile Exchange for July delivery settled at $28.58 a barrel, down 3 percent, or 77 cents. On London's International Petroleum Exchange, July Brent settled 69 cents lower at $25.65 a barrel, moving in sympathy with crude.

In petroleum products, June gasoline futures fell for the second day, settling at 87.80 cents a gallon after losing 1.72 cents on Wednesday. June heating oil futures settled at 72.96 cents a gallon after losing 1.64 cents. Natural gas for June delivery gained 0.45 cent to settle at $5,945 per 1,000 cubic feet. Contact Karen A. Davis at Novell Inc.

issues challenge to SCO Group's Linux claims read. "Contracts are what you use against parties you have relationships with. From a legal standpoint, contracts end up being far stronger than anything you could do with copyrights." Schadler said, "This is an issue of money and 'trade not patents or copyright have Linux or are thinking about using Linux should worry about," Schadler said. Novell, which bought Unix from Corp. in 1992, said it continues to hold Unix copyrights even though it sold some rights to SCO in 1995.

In a letter to SCO's chief executive, Novell CEO Jack Mess-man called SCO's claims baseless. "SCO is not the owner of the Unix copyrights," Messman wrote. "Not only would a quick check of U.S. Copyright Office records reveal this fact, but a review of the asset transfer agreement between Novell and SCO confirms it." Messman also noted that SCO, in recent months, has asked Nov ell to transfer its Unix copyrights. "We believe it unlikely that SCO can demonstrate that it has any ownership interest whatsoever in these copyrights," he said.

In a statement, SCO said it owns the contract rights to the Unix operating system. "Copyrights and patents are protection against strangers," it Sentinel whv services stocks OF LOCAL I OUR MATTRESS CLEANING DEALERS ARE CLEANING UP Become a Hygienitech Mattress Cleaning and Sanitizing Dealer and declare your financial freedom. Over 4300 dealers in Europe. New to the United States. Our proven system removes dust mites and other harmful allergens present in every mattress, regardless of age.

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Call today for complete information NEW YORK STOCK EXCHANGE 30 Franklin Street Kv Belleville, Ontario, Canada K8N 1A1 jicedW SENTINEL STAFF WIRE REPORT SAN JOSE Challenging claims that could slow the momentum of the open-source software movement, Novell Inc. said Wednesday it still-owns the copyrights to a 34-year-old operating system that is at the center of the dispute. It's the latest twist in the SCO Group ownership claim of key components to the Unix oper; ating system that may have been copied into open-source Linux software. On May 12, Lindon, Utah-based SCO sent letters to 1,500 companies saying they may face liability for using Linux, which has been growing in popularity as a low-cost alternative to both Unix and Microsoft Windows operating system. Earlier, SCO sued IBM for breaching a license by allegedly transferring Unix code to Linux.

SCO President and Chief Executive Officer Darl McBride said Wednesday that SCO's pending legal action against IBM or its claims against Linux "has nothing to do with Novell's claims." McBride says SCO had a right to file the suit and expects Novell's claims to have "zero bearing" on the outcome. Industry analyst Ted Schadler of Forrester Research in Cambridge, said he believes the SCO claim is little more than a "nuisance lawsuit." "I don't know if it was their intention or not, but SCO has introduced a fail- amount of uncertainty in the market about the adoption of Linux," he said. Forrester's opinion, "based on conversations with SCO, Novell, Microsoft and IBM, is that this is not something companies who n) wHninuiMn lei: i-uf -aoo-uti07 HYGIENITECH PRESCRIPTION V-1 DRUGS, INC. E-mail: rxcanpd.com Superior Delivery Services, Reduced Cosls WebSite: WWW.canpd.com www.Hygienitech.com Dly YTD Nnrno Ply PE Last Che Ctie Comorica 2.00 14 45.88 .39 6.1 DowJns 1.00 35 44.70 3.4 Gotchk 1.38 GraniloC .40 12 17.80 14.8 IBM .64 40 87.57 13.0 LockhdM .48 40 47.10-1.31 NokinCp .30 17.76 .73 14.6 Penney .50 14 17.20 .08 Planlron 23 20.10 .47 32.8 SBC Com 1.13 8 25.32 Saloway 18.75 SeagaloTn.12 14.84 .89 38.3 Texlnsl .09 20.17 .89 34.4 WollsFrgo 1.20 14 47.75 1.9 Wrigloy .88 30 55.88 .39 1.8 NASDAQ Dly YTD Name Ply PE Last Che Chg AppleC 18 28 27 6 Borland 9.95 CnlrlCsl 1 90 16 16.20 -9 8 Cisco 35 16.28 .13 24.3 GrtrBay .54 9 19.53 .16 13.0 Intel 08 43 19.74 26.8 MonIBB 15 25.95 30.1 MontPas 6 3.69 .06 NaviSilors 2.70 .25 20.0 Novell 3.13 .13 -63 PacCapBs.80 14 33.89 .23 33.2 Pumatech 3.72 .57 423.9 Rammkr 61 Veritas 25.95 66.1 WslMar 20 15.16 10.7 Be safe. Named one of "America's Most Admired" financial services companies by Fortune magazine.

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