Polaroid filed for Chapter 11 bankruptcy protection on Friday, but no, it's not because almost nobody wants its self-developing film anymore.
Instead, the company said that its filing, which permits the company to undertake a financial restructuring, is related to a fraud matter involving Petters Group Worldwide, owner of Polaroid since 2005.
"Polaroid's financial condition was compromised by the apparent fraudulent acts perpetrated by the founder of Petters Group Worldwide, Polaroid's parent company, and certain of his associates," the Minnetonka, Minn.-based company said in a statement Friday. "The Chapter 11 process will provide Polaroid with the opportunity to restructure its balance sheet and reduce its debt to ensure the future health and sustainability of the business."
The company has "ample cash reserves" to finance the restructuring, with no new financing needed, and Chief Executive Mary L. Jeffries said operations will continue. The company's once-iconic film and film-camera business has largely fallen by the wayside, but it still sells flat-panel TVs, printers, digital cameras, and other products.
"We expect to continue our operations as normal during the reorganization and are planning for new product launches in 2009," Jeffries said. "Our operations are strong and during this process Polaroid will ship products to our retail partners, work with our suppliers and contract manufacturers to fulfill retailer demand, honor customer warranties, and employees are expected to receive their regular paychecks without interruption."
Tom Petters and four others were charged in October with participation in what authorities said was Ponzi scheme involving investment fraud, according to the Star Tribune of Minneapolis and St.Paul.
With a recession under way, it's a tough time to be getting a business back on track. But the company can take some consolation that others also are suffering.
Canon, the top digital camera maker, said it will delay construction of a new digital camera factory in Nagasaki, Japan, because of slowing consumer demand, Reuters reported Thursday. In July, the company had said it planned to start building the plant in January and begin producing cameras there in December 2009.
The SCO Group, working to emerge from Chapter 11 bankruptcy protection, hopes to sell its Unix assets to York Capital Management for up to $36 million, the company said this week in regulatory and bankruptcy court filings.
Through the deal, York would provide SCO with $10 million in cash; up to $10 million in credit to fund its Linux-related legal fight and to get 20 percent of revenue from that action; $10 million for a 20 percent stake in the company; and $6 million to license the Hipcheck products from SCO's Me mobile device software effort and to share revenue from that line, according to the U.S. Bankruptcy Court filing.
SCO, which is engaged in expensive, controversial but so far largely fruitless Linux-related lawsuits against Novell and IBM, urged the court to approve an accelerated bidding process for the assets. The auction would allow others to offer a higher price than York, but time is of the essence, the company argued in the bankruptcy court filing.
"Based on debtors' (SCO's) financial condition, but more importantly the skittishness of existing and potential customers" to engage in a business relationship with SCO, "the debtors must move quickly to realize the highest and best price for their assets," the filing said.
The SCO Group has been beleaguered by steadily dwindling revenues. It suffered a major legal setback in August when a court found that Novell retained the Unix copyrights SCO thought it bought. But it looks like the Lindon, Utah-based company plans to keep on fighting: the asset purchase agreement specifically excludes the suits against Novell and IBM from transfer.
Unix has had a long and winding history as assets have been sold from the original sponsor of the operating-system project, AT&T. The assets were sold to Novell, then to the Santa Cruz Operation, then to Linux seller Caldera International, which renamed itself The SCO Group after trying to remake its business on the SCO Unix products. It's a tortured issue trying to decipher exactly what intellectual property--patents, trademarks, copyrights and trade secrets--traveled to new ownership or remained with earlier owners.
An SCO representative didn't comment beyond the filing. York didn't immediately respond to a request for comment.
This posting has been updated with comment from legal foes, the Linux Foundation and The SCO Group as well as with SCO financial information.
Three and a half years after launching a high-profile legal attack on Linux, The SCO Group has filed for Chapter 11 bankruptcy protection.
The Lindon, Utah-based company long has maintained that it had enough money to fight its costly lawsuits against IBM, Novell, Red Hat (which sued SCO proactively), AutoZone and DaimlerChrysler. But on Friday, a month after losing on a crucial legal ruling, the company admitted a grimmer picture.
"The Board of Directors of The SCO Group have unanimously determined that Chapter 11 reorganization is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders and employees," the company said in a statement. Added Chief Executive Darl McBride, "We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business-critical operations."
Chapter 11 protects a company's assets from creditors during a reorganization.
IBM didn't comment, but Novell said it is evaluating its options. "U.S. bankruptcy law automatically stays the court case. We're assessing our options for how to pursue our interests," Novell said. A court case was scheduled to begin Monday to determine how much SCO owed Novell as a result of last month's ruling, according to Groklaw, a site that's closely monitored the case.
All of SCO's court cases now are on hold, a company representative said.
SCO has a complicated history. It went public as Linux seller Caldera Systems, then acquired the Unix business from the Santa Cruz Operation and renamed itself The SCO Group. It then scrapped its Linux business and sued IBM and others, alleging that Big Blue violated its Unix contract by moving proprietary Unix technology into open-source Linux.However, the company's legal case was dealt a crushing blow in August, when the federal judge overseeing its case, Dale Kimball, concluded "that Novell is the owner of the Unix and UnixWare copyrights."
In the meantime, SCO has been trying to enliven its ever-shrinking business, selling its UnixWare software, and to expand into the mobile-device software market.
In June, SCO reported a loss of $1.1 million for the quarter ended April 30 on revenue of $6 million, a decline from $7.1 million in the year-earlier quarter. Legal costs that quarter totaled $1.1 million, a major decrease from $3.8 million the year before.
Jim Zemlin, executive director of the Linux Foundation, couldn't resist a dig at The SCO Group.
"If they had built their business on Linux instead of trying to attack it, they might be enjoying success like Red Hat instead of filing for bankruptcy protection," he said in a statement. "It's always unfortunate for customers when a company fails like this. But anyone could have seen this coming when they went down the misguided litigious route they did."
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