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SCO expects its Q2 sales for the period ending 31 March to be "significantly lower" than anticipated, because of "Y2K-related delays and other effects". But in mitigation, reseller activity is returning to previous levels, accordig to feedback from channel partners noted by CEO Doug Michels. SCO also issued a profits warning in January for the last quarter, when profits of $2.9 million on revenue of $54 million were subsequently reported. No forecast for the present quarter was given yesterday because it is the quiet period. In an effort to re-invent itself and perhaps remove a few cobwebs, SCO also announced yesterday a new corporate structure into three independent divisions: Server, Tarantella and Professional Services. Each division will have its own P&L, so it looks as though the plan may well be to float the divisions when possible. The restructuring, which had been under discussion for six months, appears to make it easier for SCO to focus on Linux, rather than being a knee-jerk reaction as some had suggested. The server division accounts for most of SCO's revenue at the moment, with its claim to fame being that it is the leading vendor of UNIX on Intel, with Sun far behind. Its market is mostly in small- and medium-sized businesses. Tarantella allows Linux, UNIX, mainframe and Windows applications to be installed and managed in a three tier system. In February it was announced that Tarantella for Linux will run on Caldera, SuSE, TurboLinux initially. Estimates are that Tarantella sales are in the region of $3 to $4 million per quarter, a wee bit on the disappointing side. Nor has SCO yet benefited significantly from the ASP market, although it says it is now in the process of increasing its marketing efforts considerably. SCO has used Windows support and aggressive pricing in its efforts to compete with Citrix, but confined Tarantella's availability to direct sales, effectively cutting it off from a large part of the potential market. SCO's professional services agreed earlier this month to support Caldera customers, and has a stake in Caldera, TurboLinux and LinuxMall. SCO's hidden weapon could well be its channel relationships, but its weakness has been its low profile. The Q2 results should be known around 25 April. At the end of December, SCO had $38 million in cash, $30 million in short-term investments, and $78 million in marketable securities, so it has the resources to change to rejuvenate itself. SCO shares began to rise last June from the $5 level, rose when it seemed that Tarantella might challenge Citrix's MetaFrame in the terminal server market, peaking at $35 at the end of December, before falling to the present $13 or so. ® Related stories SuSE deal puts SCO in driving seat SCO unleashes Tarantella for Linux

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