September 19, 2007 12:27 PM PDT

SCO Group admits it may fold

Having filed for Chapter 11 bankruptcy protection, SCO claims it may go under permanently, depending on how much the court decides it owes Novell.

The SCO Group may need to wind up its operations after its copyright case against Novell collapsed, prompting it to file for bankruptcy.

In August a federal judge threw out a long-running and very expensive case in which SCO had accused Novell of infringing on Unix and UnixWare copyrights that SCO claimed it owned. A month later SCO filed for Chapter 11 bankruptcy protection, whereby the company's assets are protected from creditors while the company is being reorganized under the supervision of the bankruptcy court.

"As a result of both the court's August 10, 2007, ruling and our entry into Chapter 11, there is substantial doubt about our ability to continue as a going concern," read part of a filing with the U.S. Securities and Exchange Commission, made on Tuesday.

The final straw in SCO's financial crisis seems to have been the judge's decision that its 2003 licensing of Unix to Sun Microsystems and Microsoft means that SCO now owes Novell a share of the fees generated by that business. The amount in question still has to be calculated by the court--and Novell's efforts to extract its money are on hold while SCO remains under Chapter 11 protection--but it could be as much as $30 million, which is the amount claimed by Novell, including interest.

"If a significant cash payment is required, or significant assets are put under a constructive trust, the carrying amount of our long-lived assets may not be recovered," read SCO's Tuesday statement, which also conceded the dangers of remaining under Chapter 11 protection for too long. "So long as the Chapter 11 cases continue, our senior management will be required to spend a significant amount of time and effort dealing with the bankruptcy reorganization instead of focusing exclusively on business operations. A prolonged continuation of the Chapter 11 cases may also require us to seek additional financing. If we require additional financing during the Chapter 11 cases and we are unable to obtain the financing on favorable terms or at all, our chances of successfully reorganizing our businesses may be seriously jeopardized."

The filing also confirmed that the judge's decision had scuppered most of SCO's claims against IBM--it had claimed that IBM's inclusion of Unix code in Linux infringed upon SCO's intellectual property--although SCO still intends to pursue a claim against IBM of "unfair competition" arising from the Project Monterey initiative in the late 1990s.

Also revealed in the filing was the scale at which SCO's Unix business has been declining--for which SCO blames Linux: "Revenue from the Unix business decreased by $2,704,000, or 37 percent, for the three months ended July 31, 2007, compared to the three months ended July 31, 2006, and revenue from the Unix business decreased by $5,103,000, or 23 percent, for the nine months ended July 31, 2007, compared with the nine months ended July 31, 2006."

"The revenue from this business has been declining over the last several years, primarily as a result of increased competition from alternative operating systems, particularly Linux, and from the negative publicity of the SCO litigation. We believe the inclusion of Unix code and derivative works in Linux has been a contributor to the decline in our Unix business because users of Linux generally do not pay for the operating system itself, but pay for services and maintenance. The Linux operating system competes directly with our OpenServer and UnixWare products and has taken significant market share from these products," the statement continued.

David Meyer of ZDNet UK reported from London.

See more CNET content tagged:
SCO Group Inc., Novell Inc., bankruptcy, SCO UnixWare, Unix

48 comments

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Boo Frikken Hoo
Besides Enron, has any company worked so hard to run themselves out of business?

Hopefully this farce will end with McBride serving 10-20 for various crimes.
Posted by The_Decider (3097 comments )
Reply Link Flag
Ding Dong, the wicked SCO is dead!
But we've got to verify it legally
To see...
Is morally, ethically
Spiritually, physically
Positively, absolutely
Undeniably and reliably dead

As bankruptcy judge, I thoroughly examined SCO
And SCO's not only merely dead
SCO's really most sincerely dead.

The evil M$ proxy FUD machine is at long last dead!
Posted by KonradK (65 comments )
Reply Link Flag
Munchkin Chorus
Then this is a day of independence for all the Penguins and Unices
And their descendants
Yes, let the joyous news be spread
The wicked old SCO at last is dead
Posted by KonradK (65 comments )
Link Flag
"She's going under, Captain!"
...and it's about friggin' time, too.

The sooner the MSFT/SCO charade dies off, the better.

/P
Posted by Penguinisto (5042 comments )
Reply Link Flag
Point.
And then you'll have one less thing to blame Microsoft for. :)
Posted by Vegaman_Dan (6683 comments )
Link Flag
Hey
I was gonna say that (well at least use your subject line, that is). :)
Posted by angrykeyboarder (136 comments )
Reply Link Flag
Don't mess with Open Source
Do you hear that Microsoft.
You will lose.
Posted by t8 (3716 comments )
Reply Link Flag
MSFT has open source partners
What 's Microsoft got to do with this mess .
SCO group had a failed business model ., and they are paying for it .
Besides , MSFT has open source partners like Novel , and a few others . MSFT will continue to work with willing and able open source partners in the future . it's not about MSFT. Microsoft has already WON the battle and the war with open source. open source combined revenue is pitifully less than one-tenth of Microsoft revenue . check the facts linux boy .
Posted by sokorie (18 comments )
Link Flag
If Novell didn't do that deal
If Novell didn't do that deal, they may have been able to sue Microsoft for using Novells UNIX intellectual property.

I have a gut feeling that Microsoft infringes in Unix and they financed SCO to make everybody look at Linux as the infringer instead. Then they sneakily did that deal with Novell and effectively got a way with it.

Why else did they pay Novell all that money so Novell couldn't sue them? Sure there are other reasons for that, but if Microsoft wasn't using UNIX IP, then I don't think they would have done the deal at all.
Posted by t8 (3716 comments )
Reply Link Flag
Extortion has its price...
And the lawyers are cashing in.
Posted by Dr. StrangeOne (27 comments )
Reply Link Flag
...blah...
I knew I should have quit being a MacDaddy and gone to law school...I feel like such a tool now.

=:(
Posted by `WarpKat (275 comments )
Link Flag
ROTFLMAO
told you so. Sad sad bunch of **swipes. Hope their lawyers fold as well.
Posted by gggg sssss (2285 comments )
Reply Link Flag
McBride's transitional job
For the next year or so he can go to work for the Bush administration. He'd fit in great: they're just as competent, honest, and moral as he is. I've heard that they're having staffing issues.
Posted by michaelo1966 (159 comments )
Reply Link Flag
As always, the real winners are the Lawyers...
I hope that they DO fold, and that no company ever hires their management staff and/or their lawyers. In fact I hope the execs, get sued by their employees. This has to go down as one of, if not the most, stupidest move of a company like SCO.

I especially like how they try to blame other issues, as a reason for their downfall. The best part about this....is that they owe Novell money!!!

LOL! thats right SCO, L..O...Freakin...L.
Posted by ncftech (14 comments )
Reply Link Flag
Wow, that's a record!
12 comments on ANY C|Net story I agree with. And unanimous at
that (so far). Where are you SCO defenders? Anyone?
Posted by discern (75 comments )
Reply Link Flag
I'll do it!
Ha ha, made you look
Posted by adasha76 (250 comments )
Link Flag
Why...
...would anyone defend a company that turns to bogus litigation as it's business model? I doubt you'll get any takers, but I haven't finished reading yet.
Posted by J_Satch (571 comments )
Link Flag
I Would Say Vegaman...
...but I think he's too busy next door defending Microsoft from the
evil European Union. ;-)
Posted by open-mind (1027 comments )
Link Flag
I'll defend SCO
Hey, they did a lot of good for the IT industry. Here is a complete list of their positive accomplishments:
<null>
Posted by WDS2 (183 comments )
Link Flag
SCO fan....sort of
I'll jump in here. Caldera Desktop Linux was the first linux I ever installed and used on a regular basis. I liked the distro and wish it would have remained in existence. So.....if any of the developers that worked on that worked for Caldera and are still employed at SCO I can say I'm a fan of their's.
First let me say I never supported the SCO lawsuits, they were nothing more than a pitiful attempt at blackmail. But lets not cheer to loudly. The programmers, tech support, secretaries, and even the guy who cleaned the bathrooms may all be losing their jobs. They had no say in the lawsuit and yet because of a misguided management team they may all be out of work.
Am I glad they lost the lawsuit, unequivocally, YES! Do I want to see all these unfortunate employees lose their jobs no.
Posted by mariusthull (67 comments )
Link Flag
SCO? not this Ubuntu user!
LOL.

As for their ambulance chasers -- those are probably more of "the smartest guys in the room". So clever they've got all their ill-gotten gains in hedge funds ... bwahahahahaha!
Posted by NoVista (274 comments )
Reply Link Flag
Chaaapter Seven! Chaaapter Seven!
Chaaapter Seven! Chaaapter Seven!
Chaaapter Seven! Chaaapter Seven!
Chaaapter Seven! Chaaapter Seven!

No Chapter 11 Reorganization possible as they ceased a long time ago to actually provide software support as their main business.
Posted by boomslang (65 comments )
Reply Link Flag
NASDAQ to delist SCO come Sept. 27th.
Slashdot has the details.

Hmmm... I wonder when the MSFT astroturfing crowd will make
their appearance?

/P
Posted by Penguinisto (5042 comments )
Reply Link Flag
Well...
...I'm a Windoze user (XP, no Vista) but I never cared for astroturf. As for making an appearance, I'm happier than a pig in mud to see SCO go.

OS preference has nothing to do with the fact that SCO's attempts at litigation were completely bogus and simply reflected their desperation and inability to adapt.

Even us "astroturfers" love competition because it ultimately only helps the consumer.

:)
Posted by J_Satch (571 comments )
Link Flag
Dude! Sweet!!!
This reminds me of a NIN song...
"pigs we get what pigs deserve" :D
Posted by SeizeCTRL (1333 comments )
Reply Link Flag
Die SCO.. DIE...!!!
Let the pain begin..!!
Posted by imacpwr (456 comments )
Reply Link Flag
Best news all day!
After reading all of these stories about greedy corporations it's nice to see one finally get what's coming to them! I hope Darl enjoys his new-found reputation...
Posted by kojacked (1129 comments )
Reply Link Flag
They were trying to inject some humor, right?
I noticed this part in the article:

"So long as the Chapter 11 cases continue, our senior management will be required to spend a significant amount of time and effort dealing with the bankruptcy reorganization instead of focusing exclusively on business operations."

I find it seriously laughable that they would bring this up now.

For a long time now their "senior management" was clearly more concered with a big frivilous lawsuit payoff and charging companies license fees that they weren't even entitled to.

So NOW it matters that they won't be concentrating on business operations?

They were trying to inject some humor, right?
Posted by chuck_whealton (521 comments )
Reply Link Flag
Daniel Lyons (SCO apologist) admits error
<a class="jive-link-external" href="http://www.forbes.com/2007/09/19/software-linux-lawsuits-" target="_newWindow">http://www.forbes.com/2007/09/19/software-linux-lawsuits-</a>
tech-oped-cx_dl_0919lyons_print.html

...I'm waiting for the rest of the pro-SCO shills to start a
desperate scramble to save their shattered reputations as well,
but I'm not holding my breath.

/P
Posted by Penguinisto (5042 comments )
Reply Link Flag
Sort of
The Groklaw crowd say someone keeps posting about this over there. They figure someone is trying to rehabilitate his reputation.

From a Groklaw post:

What disturbs me the most is that people are giving him credit for admitting that he was wrong... that he was "snowed by SCO". Wrong!

He failed to diligently and professionally pursue the matter as a journalist, and admission of that key fact is absolutely missing from his mea culpa. Had he done that he could have at least salvaged a morsel of respect.

But, simply pointing the finger at SCO and saying "it's their fault", after failing in his professional duties, is worse than writing the article at all.

---nyarlathotep
Posted by Phillep_H (497 comments )
Link Flag
Good Bye,And Good Riddance!
I remember when SCO was claiming they owned the copyright/patent on critical parts of the Unix/Linux infrastructure,and that anyone who installed Linux was using illegal software,if they hadn't paid SCO for it(man,had us shakin' in our boots :-)
All I have to say to SCO is Goodbye,and Good Riddance(or,put another way,see ya,wouldn't want to be ya :-)
Posted by olinz (4 comments )
Reply Link Flag
Yeah! Good riddence!
If I could, I'd like to be the first one to pull the rug from under SCO's feet! Nice to see you go, SCO! Take your greed with you, and don't come back!
Posted by ONEderer (15 comments )
Reply Link Flag
 

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