$2 here we come?

bruce_s01

July 31, 2006

looking at the 3 month chart, you can see a small bounce off of $3 then a couple of bounces at $2.5, it looks like $2 is the new destination.

Bruce S.

12:22:32 PM


Re: $2 here we come?

monsieur_bobo

July 31, 2006

It looks that way to me. One thing to keep in mind is that somewhere around $2/share represents the real value of a company like SCO minus the lawsuits if we buy Darl McBride's assertion the Unix business is cash flow positive, so I wouldn't expect the stock to drop much below $2. IBM would be happy even at this late date for SCO to recant everything and settle, particularly if they would finger Microsoft. Novell has never had any love for Microsoft, and Now that they are a Linux vendor, I'll bet they feel pretty much the same way.

12:37:55 PM


Re: $2 here we come?

hamjudo2000

July 31, 2006

"One thing to keep in mind is that somewhere around $2/share represents the real value of a company like SCO minus the lawsuits if we buy Darl McBride's assertion the Unix business is cash flow positive, so I wouldn't expect the stock to drop much below $2."

If we buy Darl McBride's assertions, we're already off in fantasy land.  The Unix business revenue is shrinking at a rather steady 20% per year.  The number of shares outstanding grows, leading to this graph of revenue per share (excluding SCOsource):

http://www.frappr.com/scoxies/photo/1597586

$2 / share is a market cap of $42,000,000.  You can make a lot of optimistic assumptions about SCOX's ability to cut expenses, but you're not going to come up with something that is worth $42,000,000 based on the Unix Revenue alone.

4:34:23 PM


Re: $2 here we come?

monsieur_bobo

July 31, 2006

[You can make a lot of optimistic assumptions about SCOX's ability to cut expenses, but you're not going to come up with something that is worth $42,000,000 based on the Unix Revenue alone.]

With revenue of $0.30/share/quarter, let's assume they can cut expense enough to net $0.10/share in profit for the quarter, or $0.40year, which is not an unreasonable margin for a 'normal' software company. That would put them at about $8M/year in profit on sales of about $24M. Give them a 10/1 PE, and a $42M market cap doesn't look too bad, even for a company wih declning revenues. McBride claims that they make about $500K/quarter in 'profit' on the Unix business now, so even at $2M/year, a market cap of $42M doesn't look too bad.

But, again, you have to buy McBride's assertion that the Unix biz is profitable as a standalone enterprise and that they can make the lawsuits go away without crushing damages. My point is that as a bag holder, if you have held down to $2/share, there isn't much additional risk in holding all the way to the bottom, so why bail out now? Also, shorts might find more attractive investments than waiting aroudn for SCOX to go from $2 to $0/share, so there could well be some covering going on as short players look for equally screwed companies with higher stock prices.

5:41:12 PM


Re: $2 here we come? Then on to $1 and beyond.

hamjudo2000

July 31, 2006

What has changed in a positive way for SCOX since Q4 of 2002?  They had a much better reputation, they had about 4 times the revenue per share, but the stock price was under $2 and dropping!   Using your twisted logic, if the stock is worth $2 today based on the just the Unix business, it should have been worth at least $6 back then, yet it was well under $2.

There have been a few other changes since then.
  1. The customer list has greatly shrank, and the remaining customers are embarrassed to be listed as customers.
  2. The size of the typical sale has gone way down.
  3. The distributor channel has shrunk greatly.
  4. The partner list has shrunk greatly.
  5. SCO has stopped winning awards.
  6. There used to be many more places that  offered education in UnixWare and/or OpenServer.
  7. Many of SCOX's international offices have been closed.
  8. Many of SCOX's employees have quit or been laid off.
  9. SCOX is known as the most hated name in Tech.
If you think SCOx still has some life, may I suggest reviewing the "success stories" at sco.com.  Many of the stories involve how wonderfully well UnixWare ran on a Pentium II.  It may have been true, but it's not relevent now.  They mention McDonalds and Radio Shack as large customers, but both have moved on.

What positive things have you heard about SCOX's business?  It's always fun to look through their filings and see what they told the SEC.

10:46:32 PM


Re: $2 here we come? Then on to $1 and beyond.

monsieur_bobo

August 1, 2006

[What has changed in a positive way for SCOX since Q4 of 2002?]

They laid off almost everybody and outsourced some functions to India to get to the point where the license revenue exceeds expenditures. At least, according to McBride they do, and there hasn't been anything in the SEC filings that proves definitively otherwise. We just don't have enough visibility into how SCO allocates costs between the litigation business and the Unix business.

There is actually a lot of merit to being able to run well on a PII. Not every application requires firebreathing performance, POS terminals certainly don't. Being able to run quickly and reliably on things like AMD Geode and Via C3's can be a plus in many markets. Being able to have closed source drivers and a device driver interface that is frozen forever is also a plus in some markets.

I don't have any argument with the rest of what you said though. To salvage anything out of the wreckage of SCO, McBride, Sontag, Stowell, young, Gupta, etc. would all need to be very publically run out of town on a rail. And, of course, if that happened, Darl would probably sue.

12:26:46 PM


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