Can SCO dodge another financial bullet?

. . . keeping an eye on the penguin

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Apr. 30, 2007

SCO announced on April 27 that it had received a NASDAQ Staff Deficiency Letter dated April 23, 2007. Such a letter formally notifies a company that it has failed to comply with the minimum bid price requirement of a dollar per share for the last 30 days.

If the company can't get its stock share to about $1 a share by October 22, it faces delisting from the NASDAQ.

Even if SCO's stock stays buried below the dollar mark, however, that doesn't mean it will be automatically delisted. On Oct. 22, the NASDAQ staff will determine whether SCI meets all the rest of the NASDAQ's listing criteria. If SCO does meet all the other listing criteria, the company will be granted an additional 180 calendar-day compliance period.

Then, if by April 22, 2008 SCO is still worth less than a dollar a share, the NASDAQ staff will start to delist the company's securities. Even then, SCO will have the option of appealing the delisting to the NASDAQ Listing Qualifications Panel.

This isn't the first time SCO has faced being delisted from the NASDAQ stock exchange. In February of 2005, the NASDAQ started to delist SCO because it had failed to file its 2004 annual report by its deadline. After restating its earnings, SCO was able to return to the market's good graces in April 2005.

Before that, SCO faced another delisting threat because of its low stock price. At that time, May 2002, SCO's stock had also dropped to below a dollar a share for more than 30 days. SCO bailed itself out of its financial hot water that time by a four-to-one reverse stock split. That is, for every four shares of SCO stock on the market in early May, the company reissued a single share.

Even that, however, turned out to be only a short-term fix. By June 2002, even with the reverse stock split, the new shares were still worth less than a dollar a share. It was only with the arrival of new CEO Darl McBride, and soon thereafter SCO's legal actions against IBM and Linux that the company's stock rose, temporarily as it turned out, above a dollar a share.

Now, with continued poor financial results and major problems with its two most significant lawsuits -- with Novell and IBM -- SCO faces yet another financial crisis.

-- Steven J. Vaughan-Nichols

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