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Unix decline extends SCO revenue drop

But the company that launched a legal attack on Linux reports a narrower net loss compared with the year earlier.

The SCO Group's revenue continued to decline in its most recent quarter, but the company that launched a legal attack on Linux reported a narrower net loss compared with the year earlier.

For SCO's fiscal second quarter, which ended April 30, revenue declined to $9.3 million from $10.1 million a year earlier, SCO said Wednesday. Its net loss diminished from $14.7 million, or $1.04 per share, to $2 million, or 11 cents per share.

The year-earlier loss was deepened by one-time charges for restructuring and for goodwill impairment. Also augmenting the difference compared with the most recent quarter was the sale this year of SCO's shares in Trolltech, a move that raised $779,100.

SCO has two major business strategies. One is selling its two versions of Unix, UnixWare and OpenServer; the latter is older but still more popular. But SCO plans to launch a new version code-named Legend June 22 that uses the UnixWare core and improves performance.

Unix revenue declined from the year-earlier period, however, down from $8.4 million to $7.8 million. After cost-cutting in recent quarters, the division is profitable, but it faces increasing competition from Linux and Windows.

SCO's second strategy is the longer-term legal attack against IBM and other Linux allies, an attack that's based on the contention that Big Blue violated copyrights SCO purports to own by moving Unix technology to Linux. SCO had hoped to sell licenses to protect Linux users from legal attack, but there have been few takers; revenue from that SCOsource initiative was $30,000 in the most recent quarter.

SCO Chief Executive Darl McBride claimed a minor victory in one of the company's cases, which accuses AutoZone of copyright infringement for using Linux. Though that case is on hold until results from the IBM case emerge, the legal discovery process is continuing.

Through that discovery, SCO said it found instances in which AutoZone mishandled SCO code, but that because it's now removed, SCO won't seek a preliminary injunction against AutoZone.

"Contrary to AutoZone's various statements to the court, SCO found through discovery, including sworn depositions, many instances of copying of programs containing SCO OpenServer code," McBride said in a conference call. "AutoZone now has removed the code it used in its migration to Red Hat Linux. Because that claim is now removed, SCO is not going to move for a preliminary injunction at this time."

AutoZone sees things differently. "AutoZone will file a response with a court to correct the record regarding what we believe to be material misstatements contained in the recent SCO filing," spokesman Ray Pohlman said in a statement.

Troubles filing regulatory reports on time earlier this year led to a threat that SCO's stock would be delisted, which meant SCO's ticker traded for a time under the symbol SCOXE. But the company met Nasdaq's requirements and in April its stock began trading again under its regular symbol, SCOX.