SCO profits turn up heat in Linux legal battle

SCO Group claims it has enough money to continue waging its intellectual property fight with Linux vendors after reporting a profit this week.

The company said profits were $3.1m during its fiscal third quarter ended 31 July, compared with a loss of $4.5m for the same period last year. Third-quarter sales totalled $20.1m, up from $15.4m a year ago.

The company said $7.3m of its revenue for the quarter came from its SCOsource licensing division, which is charged with protecting SCO's Unix-related intellectual property. The company also said it expected fourth-quarter revenue to grow to between $22m and $25m due to predicted growth of the SCOsource licensing plan.

Darl McBride, SCO's CEO, said in a statement: "The magnitude of our SCOsource licensing opportunities and our confidence in the SCOsource revenue pipeline is growing each quarter."

McBride said the company's improved financial results would allow it to continue enforcing its intellectual property rights in a fight that has become a hot topic among Linux users. "We intend to use this capital to continue our intellectual property protection and licensing initiative as well as for launching SCOx, our web services strategy," he said.

SCO shocked the Linux community in March when it sued IBM, saying the computing giant had incorporated SCO's Unix code into Linux. It then raised the stakes by sending out hundreds of letters to Linux customers, warning them that their use of Linux could infringe on SCO's intellectual property. Two weeks ago, it unveiled a licensing program that requires companies to pay $699 for the right to run Linux on a single-CPU server.

During a conference call following the results, SCO executives spent much of the time discussing the intellectual property fight and the related litigation, trying to dispel the notion that victory will go to the last company standing.

McBride said: "We have very strong capabilities to fight the legal fight to whatever level it has to go."

He said the company had spent between $600,000 and $700,000 on legal expenses since March, less than half of the $1m per quarter it has budgeted for such costs. In its financial statements, SCO accounts for legal bills under costs of sales.

During the conference call, McBride portrayed the legal battles as a fight to defend the notion of intellectual property, saying companies that value the technology and products they've developed should support SCO.

He also characterised his detractors as a vocal minority. "I would say that the silent majority is behind SCO in this case," he said.

McBride said about 100 people had travelled to Lindon so far to view the disputed Linux code, which the company is displaying under certain nondisclosure terms.

The company also said it has landed new customers during the third quarter, including Warner Bros Entertainment, Johnson & Johnson and McDonald's.

Lisa M Bowman writes for CNET News.com