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IBM bets on SCO for servers

The Santa Cruz Operation will announce tomorrow that IBM has selected its Unix operating system to run its PC servers.

The Santa Cruz Operation (SCOC) will announce tomorrow that IBM (IBM) has selected SCO's Unix operating system for use on its personal computing servers.

Sources close to IBM say the announcement will center on a marketing alliance between the two companies. But while SCO is certainly a popular Unix platform for Intel servers, IBM is keeping its options and will support other Unix-Intel marriages in the future if necessary.

Sources close to SCO also said that it will be discussing recent business deals, including ones with Chrysler (C) and Lucent Technologies (LU). SCO president and CEO Alok Mohan and Bill Colton, IBM's general manager for the PC server division, will be on hand for tomorrow's event.

Although it is but one of many Unix operating systems, SCO has carved a niche for itself as a Unix OS for Intel servers, according to Susan Frankel, an analyst at International Data Corporation. "SCO is probably about 10 percent of the overall PC server market," she said.

The alliance is being formed as SCO is in the midst of a reorganization. Last month, the company said it would lay off around 120 employees, about 10 percent of its workforce, and organize all of its product development into a single division. The company said at the time that it would record an $8 million charge as a result.

Despite increasing unit sales, overall company performance has recently disappointed investors. Last quarter, it reported lower-than-expected earnings of $974,000 on revenues of $54 million. The year before, SCO pulled in 2.9 million in earnings for the same quarter.