SCO shares keep on sliding

Even with filling for the pie

Cash Register While The SCO Group heats up it licensing attacks, investors continue to dump shares of the company at an astonishing rate.

When we last wrote on the subject in early February, SCO's shares were hovering just below the $14 mark. Since that time, SCO has dipped well below $10 per share, dropping all the way to $9.51 today on a 7 percent slide.

This decrease in price over the last month does come as part of a sluggish overall market whether you look at NYSE or Nasdaq. SCO, however, over the past three months has trailed off dramatically, while the markets have enjoyed a steady rise.

If you listen to SCO spin central, this should not be happening. SCO has finally managed to have a few companies go public with their Unix IP purchases. In addition, SCO just filed lawsuits against two large end user companies. These actions, whether you buy into their justification or not, at least added something resembling muscle to SCO's pursuits.

So why would investors that jumped at SCO's mere threats a year ago back away now when there is actually filling for the pie?

Simply put, the market is judging SCO ahead of a trial.

Back when SCO's stock was soaring, it was easy to believe that the IBM lawsuit was a means of boosting shareholder value for the Utah company. It's true enough that SCO investors are still in far better position than a year and a half ago when the company's stock reflected that of an organization with rather weak prospects. And maybe a few lucky shareholders took their gains back at $20 per share highs.

But the people with the most to gain need SCO to win, and win big. You can see the twinkle in Darl McBride's eyes when some pundit opines that SCO shares could hit $200 per share with a win over IBM. The thought of this still drives many open source fans into a state of vile rapture.

The market, however, seems to be sending a very different message - one riddled with doubt over SCO's claims. The unfettered greed that once hiked SCO to $22 a share has cooled. SCO stock has halved and may be halved again in short order with less exuberant investors on its side.

Just for a comparison, look at what Red Hat and Novell have done over the last three months. Red Hat is up almost 50 percent, and Novell is up close to 25 percent. (Novell cooled off a bit after the SuSE buy, as we predicted would happen.) In that same time, SCO is down nearly 25 percent.

The market continues to reward those companies with decently sound business models and not those placing huge bets.

If a large chunk of investors really believed SCO would win out against IBM, they would be buying in at $9 en masse, especially given the news of the last two weeks.

The only way to get SCO's shares moving up in the near-term will be for the company to show serious revenue gains from its licensing program. More multi-million dollar quarterly losses will not do the trick, if SCO want to return to double-digits again. ®

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