SCO expects to report earnings of 2 to 5 cents a share for the period ending March 31, compared with net profits of 8 cents a share a year earlier.
Wall Street had expected the company to post earnings of 13 cents a share, according to First Call.
Revenues, meanwhile, are anticipated to range between $53 million to $55 million for the quarter, up from $50.7 million a year earlier.
SCO plans to report its quarterly results on April 25.
The company said spending on Gemini, which consolidates its OpenServer and UnixWare platforms, and Tarantella, its client integration technology, was accelerated to bring the products to market faster and earn a competitive edge.
The company is currently undergoing companywide cuts to counter the increased costs of developing these new products.
Meanwhile, the company encountered weak sales in France and Germany. SCO receives more than half of its revenues from overseas sales.
"They're in a bit of a transition with their products and channels," Hambrecht & Quist analyst Christopher Galvin said.
He noted Unix software sales are having a tough time competing with the Windows NT operating system. Furthermore, the company is gearing up to roll out its new core systems product, Gemini, by the second half of the year, Galvin said.
In light of the announcement, Galvin said he will soon be lowering his estimates for earnings of 13 cents a share and revenues of $58 million for the quarter. It's too early to say where the new estimates will fall, he said.