SCO Shrinks as Other Linux Companies Expand

SCO Group is laying off employees at its Santa Cruz office, prompting speculation as to the real motive for the move throughout the Linux industry, LinuxInsider has learned.

Competitors queried by LinuxInsider said they had not heard of the layoffs previously and found them “interesting.”

A report in a local newspaper in California indicated there were “companywide consolidations and layoffs” that cut less than 10 percent of The SCO Group’s worldwide workforce, which was trimmed by at least 12 positions from the Santa Cruz office.

SCO: Driven by Wall Street?

A company spokesperson, Blake Stowell, did not reply to questions posed by LinuxInsider on the matter.(*see below) But he told the local California paper, “Basically, the company has had a goal for this upcoming third quarter to make sure our core Unix business is a profitable business. In order for us to do that we needed to make some cuts.”

The personnel cuts came close to a month after the company signed a new chief financial officer and just before it ended its second fiscal quarter.

But other Linux-related vendors insist this is not a sign of a sales slowdown in the business, and that they, contrary to SCO, are hiring rather than firing personnel.

Linux Vendors Hiring

“We know of no sales issues with Linux,” Dani Kenison, a spokesperson for BakBone, told LinuxInsider. “Everyone else, including BakBone, is hiring due to increased Linux sales. The SCO trouble is entirely due to different reasons. I wouldn’t be too skeptical about the viability of Linux.”

Another vendor that relies on Linux to drive revenues, Rackspace Managed Hosting, has had dramatic growth in the last year.

“So glad you asked. We have 406 employees — up from about 275 a year ago — with plans to hire nearly 100 more in 2004,” Annalie Drusch, director of corporate communications at Rackspace, told LinuxInsider in an interview.

“We’re growing gangbusters — 47 percent in 2003 — and have a revenue run rate of US$82 million right now,” Drusch said. “Keep in mind that we host a lot of Windows customers too. It’s about a 50-50 split between Linux and Windows.”

Cluster Vendors Growing

Even some vendors of Linux supercomputers — known as Linux clusters — are growing.

“Linux Networx is definitely experiencing expansion. The Linux cluster market is rapidly growing as users are able to get supercomputing performance for a fraction of the cost of traditional supercomputers,” Andrea Bingham, a spokesperson for Linux Networx, told LinuxInsider in an interview.

“Linux Networx has also been able to set itself apart from other cluster vendors by developing our own cluster-management software, training programs, rigorous QA and validation processes, and comprehensive service programs — all so customers can get the highest return on their investment. This has resulted in customers returning to Linux Networx again and again.”

Not the First Cuts

The news about the layoffs at SCO came as a surprise to some.

“Didn’t hear about SCO — that’s really interesting,” said Drusch.

The cuts totaled a bit less than 10 percent of the company’s total worldwide workforce of 275, SCO has said.

There were cuts at the company earlier in the quarter too, however. As of March, the company reported 305 employees, including 73 in Santa Cruz. But as of last Wednesday, the Santa Cruz office had 61 employees.

Those job cuts were across the company but did not include executives.

SCO Shrinks, Industry Grows

Overall, economic growth is soaring, and the “jobless recovery” appears to have disappeared in this election year, with perfect timing for President George W. Bush.

According to Yahoo HotJobs’ monthly Hot Jobs Index, obtained by LinuxInsider, job growth is rebounding across the United States, with average growth of 8.9 percent this April.

“Compare this to the average of 1.1 percent job growth in April 2003, and it is apparent that cautious companies are emerging from a long, cold winter of economic slowdown,” said the report.

*Note: Blake Stowell, SCO’s director of public relations, responded after deadline to queries with the following statement: “The company had a reduction in force last week in order to help the company achieve profitability in its UNIX business by the end of SCO’s third quarter (which will end on July 31). This affected a small number of employees across all areas of the company including sales, administration, marketing and engineering. In addition to the reduction, the company also consolidated all of its IT operations to the Lindon, Utah office.”