SCO Grp v. Novell Inc

Filing 335

DECLARATION of Kenneth W. Brakebill re 275 MOTION for Summary Judgment on SCO's First Claim for Slander of Title and Third Claim for Specific Performance, 271 MOTION for Partial Summary Judgment on the Copyright Ownership Portions of SCO's Second Claim for Breach of Contract and Fifth Claim for Unfair Competition, 277 MOTION for Summary Judgment on SCO's First Claim for Slander of Title Based on Failure to Establish Special Damages, 273 MOTION for Partial Summary Judgment on SCO's Non-Compete Claim in its Second Claim for Breach of Contract and Fifth Claim for Unfair Competition filed by Novell, Inc.. (Attachments: # 1 Exhibit 1# 2 Exhibit 2# 3 Exhibit 3# 4 Exhibit 4# 5 Exhibit 5# 6 Exhibit 6# 7 Exhibit 7# 8 Exhibit 8# 9 Exhibit 9# 10 Exhibit 10# 11 Exhibit 11# 12 Exhibit 13# 13 Exhibit 14# 14 Exhibit 15)(Sneddon, Heather)

SCO Grp v. Novell Inc

Doc. 335 Att. 12

Case Table of Contents

2:04-cv-00139-DAK-BCW

Document 335-13

Filed 05/25/2007

Page 1 of 2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2006

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .

Commission file number: 0-29911

THE SCO GROUP, INC.
(Exact name of registrant as specified in its charter) Delaware (State of incorporation) 355 South 520 West Lindon, Utah 84042 (Address of principal executive offices, including zip code) 87-0662823 (I.R.S. Employer Identification No.) [phone] (Registrant's telephone number, including area code)

Securities pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share Preferred Stock Purchase Rights

The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO NO

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference on Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of `large accelerated filer and accelerated filer' in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer Accelerated filer Non-accelerated Filer Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) YES NO

The aggregate market value of the common stock held by non-affiliates of the Registrant was approximately $42,410,000 based on the reported last sale price of common stock on April 30, 2006, which was the last business day of the Registrant's most recently completed second fiscal quarter. The number of shares of the Registrant's common stock outstanding as of January 24, 2007, was 21,230,465. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's proxy statement to be filed pursuant to Regulation 14A in connection with its 2007 annual meeting of

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Case Table of Contents

2:04-cv-00139-DAK-BCW

Document 335-13

Filed 05/25/2007

Page 2 of 2

distribution channel and any disruption in our distribution channel could have an adverse impact on future revenue. The decrease in products revenue of $6,127,000 from the year ended October 31, 2005 to the year ended October 31, 2006 and the decrease of $5,162,000 from the year ended October 31, 2004 to the year ended October 31, 2005 was primarily attributable to decreased sales of OpenServer and UnixWare products. These decreases primarily resulted from continued competition in the operating system market, particularly Linux. We believe that this competition from Linux will continue for the year ending October 31, 2007 and future periods. Our products revenue was derived primarily from sales of our OpenServer and UnixWare products. Other products revenue consists mainly of product maintenance and other UNIX-related products. Revenue for these products was as follows:
2006 Change 2005 Change 2004

OpenServer revenue Percent of products revenue UnixWare revenue Percent of products revenue Other products revenue Percent of products revenue

$14,098,000 59% 7,521,000 31% 2,444,000 10%

(16)% (16)% (46)%

$16,720,000 55% 8,979,000 30% 4,491,000 15%

(9)% (19)% (22)%

$18,467,000 52% 11,125,000 32% 5,760,000 16%

The decreases in revenue for OpenServer and UnixWare and other products are all primarily the result of continued competition, particularly from Linux operating system providers. The decrease in other products revenue is primarily attributable to decreased sales of UNIX-related products and decreased sales of product maintenance, which is sold separately from the product. SCOsource Licensing Revenue
2006 Change 2005 Change 2004

SCOsource licensing revenue Percent of total revenue

$116,000 0%

(30)%

$166,000 0%

(80)%

$829,000 2%

We initiated our SCOsource business for the purpose of protecting and defending our intellectual property rights in our UNIX source code and derivative works. SCOsource licensing revenue was $116,000 for the year ended October 31, 2006, $166,000 for the year ended October 31, 2005 and $829,000 for the year ended October 31, 2004. The SCOsource revenue for the years ended October 31, 2006, 2005 and 2004 was primarily attributable to SCOsource IP agreements. We believe and assert that our minimal SCOsource revenue for the years ended October 31, 2006, 2005 and 2004 was, in part, attributable to Novell's claim of UNIX copyright ownership, which may have caused potential customers to delay or forego licensing until an outcome in this legal matter has been reached. We are unable to predict the amount and timing of future SCOsource licensing revenue. Services Revenue
2006 Change 2005 Change 2004

Services revenue Percent of total revenue

$5,060,000 18%

(10)%

$5,648,000 16%

(15)%

$6,628,000 15%

Services revenue consists primarily of annual and incident technical support fees, engineering services fees, professional services and consulting fees. These fees are typically charged and invoiced 26