Concerns About Caldera Mount

Caldera Systems Inc.'s proposed acquisition of SCO's server and services business may not help the company remain competitive against strong Linux competitors, said analysts. While executives were explaining their plans to merge Unix and Linux this week, Caldera's quarterly results raised concerns about the company's future.

Orem, Utah-based Caldera announced a slightly better-than-expected $7.5 million loss for its third quarter ended July 31, but revenue grew a modest 9%, to $1.2 million, from the same quarter a year earlier.

"I'm surprised at how little revenue they generated," said Bill Claybrook, an analyst at Aberdeen Group Inc. in Boston. "Caldera seems to have the products in place, but they don't seem to be generating any revenues."

Claybrook said he expects that to change when the acquisition of SCO's server unit is completed. "They'll be doing $100 million-plus a year," he predicted.

But other analysts pointed out that SCO's UnixWare and OpenServer sales are declining.

"I don't see how [the SCO acquisition] helps them in the long term," said Prakesh Patel, an analyst at W. R. Hambrecht & Co. in San Francisco.

Unlike other Linux players, such as Red Hat Inc. in Durham, N.C., and VA Linux Systems Inc. in Sunnyvale, Calif., Caldera doesn't have a clear path to profitability, said Patel. "They are still competing in the [Linux] distribution space, and Red Hat has that locked up," he said.

This week, Caldera's stock was trading at less than $6 per share for the first time, far below its $14 initial public offering price. On March 21, the day of the public offering, Caldera closed at 29 7/16.

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