Partners fund SCO Group's next lease on life
Stephen Norris & Co. Capital Partners said Thursday it and unnamed Middle Eastern partners will fund The SCO Group with up to $100 million to take over the financially beleaguered Unix company, move it out of bankruptcy protection, complete its controversial and unsuccessful Linux litigation, and take it private.
The SCO Group's board has approved the transaction, and the company should exit bankruptcy "in the coming year," the company said. And SNCP's reorganization plan "will also enable the company to see SCO's legal claims through to their full conclusion," it said.
The SCO Group sells a version of Unix that never achieved the popularity of rival products from companies such as IBM or Sun Microsystems, but it's better known in recent years for its ill-fated legal action that asserted Linux infringed its Unix intellectual property. The case largely fell apart when a court found that Novell still owned the Unix copyright.
Despite an attempt to begin a new line of mobile-computing software called Me, the company's revenue dropped steadily from $79 million in fiscal 2003 to $22 million in fiscal 2007, during which the company reported a loss of $6.8 million. And last week, the company announced layoffs of 30 employees from a staff numbering about 115.
Stephen Norris, managing partner of the firm, though, was bullish on the Lindon, Utah-based company's prospects.
"We saw a tremendous investment opportunity in SCO and its vast range of products and services, including many new innovations ready or soon to be ready to be released into the marketplace," said. "We expect to quickly develop these opportunities, and to stand behind SCO's existing base of customers and partners."
It's not clear how much the investors will have to pay to acquire their controlling interest and to take SCO private. News of the investment sent SCO's shares, traded over the counter since its delisting from Nasdaq in 2007, up 3 cents per share to 9 cents, giving the company a market capitalization of about $2 million.
The companies didn't disclose who the Middle Eastern partners are, but Norris' biography indicates he's worked with some on more than one occasion. He "acted as a principal financial advisor to Prince Al-Waleed bin Talal Al Saud of Kingdom Holding Company in structuring and negotiating the re-capitalization of Citibank" and worked on "the offer by a major Saudi Arabian investment firm for Lamborghini in Italy."
In October, The SCO Group had disclosed a plan to sell its Unix assets to New York Capital Management for up to $36 million. It appears now that the Unix assets will remain with SCO.
"This significant financial backing is positive news for SCO's customers, partners and resellers who continue to request upgrades and rely upon SCO's Unix services to drive their business forward," said Jeff Hunsaker, The SCO Group's president and chief operating officer, in a statement.
Investing in SCO has proven difficult. One fund, BayStar Capital Management, invested $50 million in 2003, but unwound the deal in 2004 after much bickering.
Update 12:46 p.m. PT: I added more information on The SCO Group's legal case and its market capitalization.
Stephen Shankland writes about a wide range of technology and products, but has a particular focus on browsers and digital photography. He joined CNET News in 1998 and since then also has covered Google, Yahoo, servers, supercomputing, Linux and open-source software, and science. E-mail Stephen, or follow him on Twitter at http://www.twitter.com/stshank. 
LOL!!!!!!!!!!!
I believe that's the core value this mideast investment company sees in pursuing the case. It's as simple as that.
My guess is that someone owns a lot of Microsoft stock and wants the SCO case to continue to keep spreading the FUD about linux and artificially inflate MSFT.
Even then, there's little reason to believe that there'll be an issue.
SCO abandoned all their copyright claims against Linux pretty
early on. The only claims that they are currently pursuing are
contractual claims against IBM regarding development related to
AIX. Even if IBM loses, SCO would need to file suit again.
Even then, it'd be an uphill battle they couldn't afford to fight
again. They've already burned through more than $100 million
and even their own lawyers had to admit that they couldn't make
a convincing claim of infringement against Linux the first time
around. It doesn't help that the majority of the code they
claimed infringement upon was BSD-licensed code that a court
had already determined was taken with attribution by AT&T and
incorporated into SVR4 UNIX.
SCO lost its case in court. They're about to face an unholy firestorm from the Novell and IBM countersuits, not to mention whatever AutoZone and Daimler-Chrysler want to do with the remains.
I don't see them surviving much longer... about however long it takes for Novell to collect ~$30 million in unpaid fees from SCO (which is due right now), then whatever Novell gets in punitive damages, then whatever IBM gets in punitive damages...
I give it about 12 months at the most.
/P
I hope that through some legal maneuver, once they get some more funding a good chunk of it can go immediately to those who they owe.
Of course, it never works that way.
Do they still have the came CEO that made these bad decisions? If so, I'm sure it'll only be a matter of time before they run through their new funding. Who knows, maybe they'll make an attempt at some new frivilous legal actions.
Charles R. Whealton
Charles Whealton @ pleasedontspam.com
now, ironically enough, headed by former IBM CEO Lou Gerstner.
He got drummed out, but not before getting cozy with many of
the investors (Bush Sr., the Saudi royal family, the bin Laden
family, a veritable who's-who).The Carlyle Group was the
company that filed for the IPO of United Defense in October
2001, having the bin Laden family as large investors in the
company. The bin Laden's gave up their stake and disavowed
their relative when this became public.
After being booted from Carlyle, Norris started a number of
private equity firms, got sued by one of them, I think (GMG?)...
Basically a little bit of this, a little bit of that... Sits on the board
of a number of smaller tech and military contract companies.
Still providing financial advice to the Saudi royal family...
Now he has his own company, claims Gen. Wesley Clark as a
member of his investment board, and announces that he has
unspecified middle-eastern partners willing to invest up to $100
million dollars in a company with a market capitalization of <
$2M dollars? Strange. The mention SCO's "vast range of
products", but SCO only lists 9 distinct products on their
website, and 5 of those are configurations of their UNIX products
(which they've been trying to unload and have largely eliminated
the staff supporting it)...
Very, very strange. It makes no sense.
Like those zombies, they just keep coming back.
Pay your bills SCO and then you have my permission to die.
Their only real product is a dying/dead OS (UnixWare).
The entire tech industry hates them.
The company is in Chapter 11.
They've been delisted from NASDAQ.
...so who in the unholy hell would think a situation like that to be worth a $100 million investment?
All fingers (IMHO) point to Redmond, Washington.
/P
rat-boy side kick SB!
- Heres a little question...
- by Gayle Edwards February 14, 2008 9:31 PM PST
- Pure speculation, mind you...
- Like this Reply to this comment
-
(23 Comments)But, SCO was completely washed-up... legally, financially, and commercially. Frankly, they were utterly-disintegrating, thanks to the entire, BOGUS, UNIX/Linux debacle (I wouldnt have even been surprised by legal-actions, and investigations, being taken against those that ran the company into the ground).
...And, if SCO did completely fall apart, a whole lot of information regarding the entire, deceptive, Anti-Linux FUD campaign (that destroyed SCO) just might have finally come out (...such as irrefutable, and very public, proof as to just -who- many of the actual proponents, and backers, of SCOs suicidal and nonsensical FUD-campaign, might have actually been).
...And suddenly, at the exact same time that a certain major software manufacturer (which is having an absolutely terrible time with adoption of its new products) desperately, really, needs to restore its seriously-faded-image... and also would like nothing better than to undermine one of the most serious threats to its wildly-unpopular market-strategies...
...Some, mysterious, un-identified, "backers" suddenly, irrationally, want to pump a hundred-million dollars into the BLACK-HOLE of failure, and deception, that is... "SCO".
Now, who would do that... and, why?