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IBM, SCO join forces on servers

The two companies say they will combine technological and marketing resources to promote SCO's Unixware on IBM's Intel-based servers.

The Santa Cruz Operation (SCOC) and IBM (IBM) said today that they will combine technological and marketing resources to promote SCO's Unixware on IBM's Intel (INTC) servers.

Under the new alliance, first reported yesterday by CNET's NEWS.COM, IBM will offer SCO's operating system across its Intel server line, including its four-processor servers, said Bill Colton, IBM's general manager for the PC server division.

The two companies will work together to recruit independent software vendors, resellers, and, of course, corporate customers to the Unixware-IBM platform, according to SCO chief executive Alok Mohan. IBM will also provide financial support, he added.

But, like many of the features of the new alliance, details have not yet been set or were not disclosed.

Promoting Unix on Intel servers serves the marketing plans of both companies, said executives and observers. Like other Unix vendors, SCO faces a challenge from Windows NT, which is becoming an increasingly popular, and more powerful, server operating system. By concentrating its efforts on the Intel platform, SCO can accommodate the growth of Intel servers and differentiate itself from other Unix vendors.

"Intel servers are getting into the enterprise server space. Intel isn't just about PCs anymore," Mohan said. "There are two choices are far as Intel servers go, and that is Unixware and NT."

Conversely, cross-promotion could give IBM's Unix server sales a boost. "They've got some catching up to do against Sun," said Rahul Narang, an investor with J.P. Morgan Securities.

SCO is in the midst of a reorganization. Last month, the vendor of operating systems 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 at the time said it would record an $8 million charge as a result.

Despite increasing unit sales, overall company performance has recently disappointed investors. Last quarter it had 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.