A bankruptcy court judge has denied a request by the SCO Group to sell off part of its business, a move that could have helped it pursue court cases against Novell and IBM.
SCO, which has been in bankruptcy court since 2007, had proposed to sell off most of its Unix business assets to a company called Unxis, the latest in a series of proposals aimed at allowing the company to exit bankruptcy and continue its high-profile Unix litigation.
IBM and Novell, on the other hand, had requested that SCO's assets be liquidated, effectively putting an end to the cases against them.
On Wednesday, U.S. bankruptcy court judge Kevin Gross denied both motions. Instead, he appointed a trustee to take control of SCO and evaluate how the company should proceed in its efforts to exit bankruptcy protection. Part of the trustee's remit will be to evaluate SCO's chances of winning its Unix case, Gross said.
"The 'potential' of the litigation must...be weighed against the reality of the cost," Gross wrote. "A trustee will be in a better position to make that assessment without the personal and emotional investment of SCO's management."
In 2003, SCO launched a lawsuit against IBM, saying the company infringed on SCO's intellectual property by including code from Unix in Linux. However, in 2007 a judge found that Novell, rather than SCO, owns the copyrights covering Unix. As a consequence of that decision, Novell is pursuing SCO in court for a share of the fees SCO received from licensing Unix to Sun and Microsoft.
Gross noted that since 2007, SCO has offered several plans for reorganization and then withdrawn them, and argued that the latest sale proposal "calls into question whether the sale has a sound business purpose and raises doubts of the parties' good faith."
It is now necessary for a third party to take charge, according to Gross. "No one can fairly argue that the court has not been patient with the debtors. The court is now unwilling to continue to wait while debtors' losses mount," he wrote.
SCO had proposed to sell its Unix business for $5.25 million (3 million British pounds), keeping only its mobile applications business, which the judge deemed "virtually worthless." He said SCO's officers had "bet the company" on the litigation, which would be SCO's "sole business" if the Unix assets were allowed to be sold.
In a statement, SCO said it was reviewing the decision and evaluating its options.
Matthew Broersma of ZDNet UK reported from London.
The rough seas of the consumer electronics business has caused yet another smaller boat to capsize. Soyo, the maker of Honeywell TVs, has filed for Chapter 7 bankruptcy protection.
(Credit:
CNET)
The news was first reported by the HDGuru.com blog. An SEC filing from earlier this week states that the company shut down operations on May 5, and filed for Chapter 7. Chapter 7 means the company is planning on liquidating its remaining assets, with no plans to reorganize under a new repayment plant to creditors, as a Chapter 11 filing would allow. The company could not be reached for comment.
Soyo makes LCD monitors, portable hard drives, and Bluetooth ear pieces, but is probably most recognizable since it owns the license to sell TVs under the Honeywell brand name. It's unclear how customers who recently bought Honeywell TVs are to deal with repairs or warranties issued by the company.
While Honeywell wasn't one of the top brands of TVs, its exit from the TV market is yet another sign of the ongoing shakeout taking place in the consumer electronics business. Syntax-Brillian, maker of Olevia brand HDTVs, filed for bankruptcy last summer, shortly after Philips turned over its North American TV operations to Funai.
More recently Pioneer has said it will no longer produce TVs after March 2010
Like Pioneer, Soyo's exit from the TV business was forced by mounting losses, in this case, more than $25 million in loans. Worldwide TV sales dropped 6 percent in the most recent quarter, as consumers find themselves with less discretionary income to spend on gadgets, and as the market for LCD TV buyers becomes increasingly saturated.
The typical way gadget makers deal with declining sales is to introduce new technology. But the TV industry is still years away from the next step of broad availability of OLED (organic light-emitting diode) TVs. They're still prohibitively expensive to produce on a large scale, and most companies working on OLED right now--Sony, Sharp, LG, Panasonic--don't seem to be in a rush.
Until then, expect to see more stories like this one, companies either dropping out of the TV business altogether, combining operations with a competitor, or licensing its brand away in certain markets.
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Rackable Systems, a data center hardware specialist, is adopting SGI as its new name, after completing its acquisition of Silicon Graphics Inc.
Good-bye, old logos...
The company announced the move Monday. Its $42.5 million purchase of the supercomputing company was granted court approval on April 30 and closed on Friday.
For the deal, Rackable created a subsidiary called Silicon Graphics International. That subsidiary then acquired the assets and liabilities of Silicon Graphics Inc. Rackable will now be known as "a Silicon Graphics International entity," and Silicon Graphics International will be branded as SGI.
The new SGI's portfolio will include high-performance products for medium- and large-scale data centers and high-performance computing. The board of the company is composed of senior executives from both Rackable and the former Silicon Graphics Inc., with Rackable CEO Mark Barrenechea remaining the company's chief executive.
...Hello, new logo.
In a blog post Monday, Barrenechea wrote that the Rackable name will live on as the brand for SGI's x86 cluster compute products. "Rackable will join our other industry-recognized brands--such as ICE Cube, Altix, InfiniteStorage, CloudRack, MicroSlice, Origin, and VUE--to comprise the new SGI," he wrote.
Fremont, Calif.-based Rackable was started in 1999, but Sunnyvale, Calif.-based Silicon Graphics Inc. goes back to 1981, when it was founded by a group of Stanford University alumni. Silicon Graphics Inc., which has major contracts with clients such as the U.S. Department of Defense, went into Chapter 11 administration at the start of April and was immediately snapped up by Rackable.
David Meyer of ZDNet UK reported from London.
Qimonda, an affiliate of Germany-based Infineon Technologies, is seeking protection under Chapter 11 for its U.S. unit, the company said Monday. Separately, a research report was released today forecasting dim prospects for chipmakers in 2009.
The U.S. unit of Qimonda AG, one of the world's largest memory chip manufacturers, said in a statement that it is seeking bankruptcy protection. "The US subsidiaries Qimonda North America Corp. and Qimonda Richmond L.L.C. filed for creditor protection under Chapter 11 on February 20, 2009," the company said in a statement Monday. "No disruptions to operations, particularly to customer deliveries, are expected to result from this," the statement said.
In January, Qimonda AG filed for insolvency protection in Germany after it was not able to secure government financing.
The company listed the following vital statistics on its Web site:
- Pioneer in 300mm manufacturing: Almost 90 percent of the DRAM bits shipped are 300mm
- About 13,500 employees worldwide (status: December 31, 2007)
- 3.61 billion EUR net sales in Financial Year 2007
In related news, a report released by market research firm In-Stat forecasts continued contraction of worldwide chip sales.
"The global recession will wreak havoc on semiconductor sales this year," the report said. Worldwide semiconductor revenue will decline by nearly 20 percent in 2009 to $199.2 billion, the firm said. The industry will not recover to 2007 levels until at least 2012. This echoes recent comments from Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co..
"Declining confidence resulting from recent shocks and increased uncertainty about the future will lead to more conservative spending even after liquidity improves and the economic recovery is well underway," wrote Jim McGregor, an In-Stat analyst. Revenue growth in 2010 will be modest, at 11.8 percent, the report added.
After exploring other options, Circuit City said Friday it will begin liquidating all remaining stores.
Circuit City calls it quits.
(Credit: Circuit City)About 30,000 employees face layoffs as the rest of its 567 stores are closed. The fates of outstanding warranties, its Firedog repair service, and Canadian stores are still to be determined, according to the company.
The nation's second-largest consumer electronics retailer filed for bankruptcy in November and initially closed 155 retail outlets in an attempt to get its roughly $2 billion debt under control. Just a week ago, Circuity City announced it was in talks for a sale with two "highly interested" parties. After the talks broke down, the company said, it had no choice but to liquidate all remaining merchandise and shut its doors.
"We are extremely disappointed by this outcome. The company had been in continuous negotiations regarding a going concern transaction. Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company," James Marcum, acting president and chief executive officer for Circuit City, said in a statement.
The disappointing, recession-weakened holiday season likely sealed the retailer's fate, although the real problems began before the economic downturn. The retailer had posted several huge losses late 2007 and early 2008, but the rash of bank failures in September and October proved disastrous for it.
The resulting global credit crunch hit Circuit City hard. The retailer buys TVs, stereos, laptops, and other gadgets on credit, usually at a good rate from vendors with the promise to pay them back once the company sells the goods in its stores. But as the company racked up huge losses, and credit became suddenly more expensive, vendors stopped giving Circuit City reasonable financing rates.
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This was originally posted at ZDNet's Between the Lines.
Circuit City said Friday that it is in talks with "two highly motivated and interested parties" about selling the company as a going concern. Meanwhile, Best Buy, the largest electronics retailer in the U.S., reckons it continues to take market share.
Circuit City asked the bankruptcy court to approve procedures that officially would sell Circuit City in total, by business units, or by assets such as inventory.
In a statement, Circuit City said:
These interested parties are considering providing additional financing to allow the company to sustain operations and move forward with a subsequent restructuring through a stand-alone plan and/or purchasing the company or all or substantially all of the company's assets. The parties have substantially completed due diligence and now are in negotiations with the company and the company's major stakeholders in order to finalize such a transaction. While the company is optimistic that a transaction can be successfully finalized, no assurance can be given that this will occur.
If these transactions don't occur by Jan. 16, Circuit City could liquidate.
Separately, Best Buy narrowed its financial outlook. Best Buy on Friday said its holiday revenue was in line with revised expectations, but same store sales fell 6.5 percent.
The electronics retailing giant made the announcement at the Consumer Electronics Show.
By the numbers:
• Revenue was up 4 percent for the month ending Jan. 3 to $7.5 billion, in line with expectations.
• Best Buy narrowed its earnings targets. The company is predicting fiscal 2009 earnings to be $2.50 to $2.70 a share, excluding a $111 million investment impairment charge. The company had projected 2009 earnings between $2.30 and $2.90 a share.
• The company will take a fiscal fourth quarter charge of $60 million for its voluntary severance program.
Here's the breakdown of sales by category:
While many retailers are understandably nervous about what this holiday will bring, none is likely more so than Circuit City.
Blockbuster rescinded an offer to buy the beleaguered chain earlier this year and its CEO stepped down in September. Its stock has been languishing below $1 for long enough that the company has been notified it could be delisted from the New York Stock Exchange. And now the company has been forced to close 155 stores right before the crucial holiday sales period because of the dearth of credit available in the market right now.
(Credit:
Circuit City)
For all intents and purposes, it appears the nation's second-largest electronics retailer is on the verge of disaster. Even if this season's sales results end up not being as bleak as some are predicting, it's unlikely even that could save Circuit City at this point. Circuit City did not respond to a request for comment for this article.
Though Wall Street analysts who watch Circuit City closest aren't ready to go on record to go on a death watch for the electronics chain, suffice it to say, its pulse is getting weaker and things aren't looking good.
The global credit crunch is hurting Circuit City in particular. The retailer buys TVs, stereos, laptops, and other gadgets on credit, usually at a good rate from vendors with the promise to pay it back once the company sells the goods in its stores. But as the company has racked up huge losses, vendors are not giving Circuit City reasonable financing rates. Though Circuit City hasn't come out and said so, some vendors could be convinced altogether that the retailer flat out won't be able to pay the money back and could decline to send Circuit City any products at all. At that point, it becomes almost impossible for Circuit City to operate.
Because of this, the business model of Circuit City and other electronics retailers doesn't work without very fast growth. And sales of many of the big-ticket items like notebooks, flat-panel TVs, and even gaming consoles (it's the first year in awhile there won't be a hot, new, hard-to-get console), are tapering off.
No doubt, the slumping economy is causing some consumers to be more conservative about purchases this year. Consumers polled by the Consumer Electronics Association say they plan to spend $200 less this year than last on holiday items.
Add to that a fundamental shift in the way media is consumed--more online video and digital downloads, slowly moving away from packaged media and accompanying players--and the future of the electronics retail business doesn't look so bright. As prices drop, it gets harder to grow business. And without that growth, it's impossible for Circuit City to pay back those loans, much less suddenly become profitable, said one analyst who asked not to be quoted. ... Read more
In order to avoid filing for bankruptcy, Circuit City is weighing its options.
According to a report in The Wall Street Journal, the troubled electronics retailer is considering a plan to close some stores and cut thousands of jobs. The Journal cites "people familiar with the matter" who say Circuit City has also hired a bankruptcy firm, as well as a consulting firm and an investment bank to negotiate emergency financing.
Instead of filing for bankruptcy, one outlined plan calls for closing 150 stores, which would free up $350 million from inventory that could be used to pay off some of the company's debt.
The retailer said that for the record it is considering several options, but won't be discussing its plans publicly.
Circuit City is the U.S.' second largest electronics retailer behind Best Buy, and has 714 stores in the U.S., and 772 in Canada.
Things have gone from bad to worse for the retailer after posting huge losses earlier this year, followed by a buyout bid from Blockbuster, which failed, and Chief Executive Philip Schoonover's departure in September.
News that the company is considering filing for bankruptcy protection comes just before the all-important late-year holiday sales rush, which is unfortunate timing. Besides a dismal economy, and having to compete with Best Buy and Wal-Mart Stores on Black Friday prices, the company also must now deal with declining consumer confidence in a chain that may not make it to next year.
Syntax-Brillian, one of several smaller LCD TV makers to use club store sales to do an end-run around the category's traditional leaders, has filed for bankruptcy.
The Tempe, Ariz.-based Olevia television and Vivitar digital camera maker, filed for protection from creditors in a Delaware court following a year of missed sales targets, leadership changes, and accounting problems, according to Reuters.
The company's stock has dropped more than 90 percent in the last year, and its efforts to refinance and raise additional financing were unsuccessful. With just eight employees left at headquarters, it has ceased operations.
A new company, called Olevia International Group, has been created and will take on $60 million of Syntax-Brillian's debt, and the Vivitar digital camera unit will be put up for sale. The company had total debts of $259.4 million and assets amounting to $175.7 million.
Analysts that follow the flat-panel television market have been warning since late last year that there would be an eventual shakeout in the business, as more small brands piled on the growing LCD TV market.
Earlier this year, Philips announced it would no longer be producing its own televisions in North America, and enlisted Funai to do so on its behalf.
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