SCO warns of 3Q letdown, pursues strategic alternatives

The Santa Cruz Operation (Nasdaq: SCOC) warned of losses far higher than expected in the latest quarter and said it is looking for strategic options.

After market close Monday, the provider of Unix software and services said it expects to report a fiscal third quarter loss ranging between 50 cents and 55 cents per share, on revenue of $26 million to $28 million. The lone analyst surveyed by First Call predicted a loss of 13 cents per share for SCO's quarter ended June 30.

SCO has hired investment bank Chase H&Q to evaluate strategic opportunities, said Doug Michels, president and CEO of SCO.

"Looking beyond our short term difficulties, SCO is well poised to take advantage of these changes either by itself or in strategic combination with other players," Michels said.

Shares of SCO tumbled to $3.63 in afterhours activity on the Island electronic communications network, following the quarterly pre-announcement. The stock closed Monday's regular trading at 5 11/16, down 5/16 for the session.

The company blamed the third quarter shortfall partly on a failure to close several large contracts with government and corporate clients before the end of the quarter. Several software companies have reported similar problems in the quarter that just ended.

Enterprise software vendors typically sign the bulk of their contracts near the end of a quarter.

SCO also cited a slow post-Y2K recovery in its distribution channel and overall weakness in its software market.

The company remains pleased with its Tarantella products for application servers, said Doug Michels, president and CEO.>