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SCO doesn't sway market

Despite a 52 percent increase in first-quarter profits, Unix vendor SCO's stock dips more than 4.5 percent.

A strong increase in profits from Santa Cruz Operation (SCOC) failed to impress Wall Street today.

The stock dipped more than 3/8 to close at 7-7/8, despite the fact that the Unix vendor yesterday reported a 52 percent increase in first-quarter profits. The stock closed yesterday's at 8-1/4.

This quarter, SCO reduced inventories, grabbed some large customer wins, and took more business in an industry facing flat growth.

As a result, SCO reported net profits of nearly $3.97 million, or 11 cents a share, for the quarter ending December 31, compared with net profits of $2.6 million or 8 cents a share a year ago. The company's earnings were largely in line with analysts' expectations.

Revenues rose to $56.6 million for the quarter, up from $47.9 million from a year ago.

"Their revenues were better than what we were expecting, and their earnings were in line with what we had," said Christopher Galvin, an analyst with Hambrecht & Quist.

He added SCO has done a good job at increasing its market share since it purchased the Unix-based business from Novell in 1995.

"Windows NT has been putting pressure on them, but they are still showing growth in a market that has been flat," Galvin said.

SCO also captured higher profits by bringing some of its technology development in-house, which improved its profit margins.

The company also today named John Luhtala as its new chief financial officer. Luhtala formerly served as chief financial officer and vice president of mergers and acquisitions at SyQuest Technologies.

Luhtala replaces John Jarvis, who has become SCO vice president of new business opportunities in Europe.

"I'm pleased to report the continued growth of our revenues and our profits. The record revenues represent our fifth consecutive quarter of strong growth and are 18 percent greater than the first fiscal quarter of 1996," said Alok Mohan, chief executive and president, in a statement.