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The Unix company stated a net loss of $7.4mn on revenues of $11.2mn for the quarter ending 31 July, actually beating analyst estimates of $10.2mn.

While SCO has announced a raft of new Unix products of late and says that side of its business is now back in profit, its $8.9mn revenues from selling Unix is down annually on the $10.8 figure of Q3 2003, reflecting an overall decline in the Unix market as Linux and Windows make inroads on server sales.

So where did that loss come from? SCO's initiatives to license and litigate its claims to Unix intellectual property brought in $678,000 - a ballistic increase sequentially on the preceding quarter's $11,000 - but at a cost of $7.3mn.

The previous quarter's $11,000 revenues cost $4.5mn. Even so the figures are not proportional as the costs include SCO's court battles with IBM and Novell. SCO admits it is impossible to predict SCOsource licensing revenues from quarter to quarter.

Darl McBride, president and CEO, The SCO Group, said: 'We successfully delivered on our strategy to restore profitability within our Unix business which is generating positive cash flow. At the same time, we saw

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a nice uplift from SCOsource licensing revenue... We remain steadfastly committed to enforcing our intellectual property rights on behalf of our customers, employees and shareholders. Through the combination of the quarter's positive developments and our current cash position, we are well-positioned to pursue our current litigation through its conclusion.'

To that end, SCO has also announced new measures to protect its exposure as the cost of litigation takes its toll: it only has about $16mn in cash, compared with $64mn at the end of October last year.

These include a Shareholder Rights Plan, which will help prevent a hostile takeover from a company looking to pick it up on the cheap. SCO Chairman Ralph Yarro, III, said: 'The plan will not prevent a takeover attempt, but should encourage anyone seeking to acquire the company to negotiate fair value directly with the board of directors.'

SCO says it has also agreed a letter of intent with its law firm Boies Schiller & Flexner LLP to limit the total amount it pays for its legal activities to $31mn in return for an increase in the fee it receives for damages won and other certain events. These contingency payments will range from the original 20 per cent to 33 per cent.

The company also confirmed the retirement of $50mn investor BayStar's 40,000 shares of SCO's Series A-1 Convertible Preferred Stock in exchange for $13mn in cash and 2.1 million shares of common stock. This resulted in a contribution to capital of nearly $15.5mn, but SCO paid back $13mn cash to BayStar as well.

The company expects Q4 revenues to pitch between $10mn and $12mn.

SCO's results were announced after trading yesterday - its share value was down 3.3 per cent to $3.8 at that time.