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Santa Cruz Operation tanks on earnings outlook

Santa Cruz Operation Inc. (Nasdaq: SCOC) plummeted 30 percent Wednesday after it said Tuesday that second-quarter and year-end sales will be significantly lower than expected.

Shares were down 3 15/16 to 9 1/8. The company, which makes server-based software for networked business computing, cited continuing Y2K-related delays and other effects for the shortfall. CEO Doug Michels said the market for our UNIX server software has not recovered as quickly as we expected following the Y2K period, though he is "encouraged by recent feedback from major channel partners that reseller activity has begun to return to previous levels."

SCO said added that results for the year will be significantly below its original estimates of $250 million in revenues and earnings of 60 cents a share. The company beat First Call estimates by a penny in its recently reported fourth quarter.

The company also announced it is splitting into three independent divisions focused on e-business servers, its Tarantella software and Internet professional services. The company managed to squeeze the Linux word into its press release by announcing that its server division will expand into the emerging Linux market.

All three divisional entities will be accountable for their own profitability and have the flexibility to forge alliances, pursue investments and drive product strategies, the company said.

Reuters contributed to this report.