SCO files for bankruptcy

SCO files for bankruptcy

Summary: SCO Group, best known for suing IBM, has filed for Chapter 11 bankruptcy.In a statement, SCO said it was filing to reorganize under Chapter 11.


SCO Group, best known for suing IBM, has filed for Chapter 11 bankruptcy. In a statement, SCO said it was filing to reorganize under Chapter 11.

The Board of Directors of The SCO Group (history lesson) 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.

I'm not sure what SCO bankruptcy does for shareholders, which usually get nada in a bankruptcy proceeding, but SCO may have a point about saving itself via Chapter 11. Groklaw reports that SCO owes Novell money. A trial starts on Monday to determine how much SCO owes Novell. It's unclear what this bankruptcy filing means for Novell--if I were to guess it probably means Novell is out of luck unless it owns some sort of preferred debt.'s Stephen Shankland reports that Novell's case will be automatically stayed due to the bankruptcy filing. Update: Groklaw has all of the documents pertaining to the bankruptcy, including the creditor list.

In the grand scheme of things SCO was being crushed by legal challenges and running out of cash. SCO launched a legal war against IBM alleging that Linux was really just Unix in a new wrapper. With that argument SCO was planning on collecting royalties.

The plan went awry given a series of legal setbacks. Now the cash is running dry and SCO's best bet if it wants to survive is to reorganize its subsidiaries to focus on Unix and mobile services. If the courts ruled that SCO owned Novell anything above $12 million SCO would be close to broke.

What's really surprising is that the bankruptcy took this long. In January, observers were expecting SCO's cash to run dry.

The cash burn

At the end of the second quarter ending April 30, SCO had $7.78 million in cash and equivalents and $5.4 million in restricted cash.

Meanwhile it posted a second quarter loss of $1.14 million on revenue of $6 million. That was an improvement, but revenue falling SCO just wasn't sustainable. Revenue for the first two quarters of fiscal 2007 was $12 million, down from $14.4 million the year earlier.

On June 5, SCO said:

The decrease in revenue was primarily attributable to continued competitive pressures on the Company's UNIX products and services and the improvement in net loss was primarily attributable to reduced legal costs and operating expenses.

Even though legal costs improved, SCO still had $1 million in litigation costs for the second quarter. That was down from $3.76 million in the same quarter a year ago, but SCO just didn't have the financial heft for a long legal battle against a well-armed IBM. It didn't help that SCO was losing most court battles.

Meanwhile, the core business (Unix and mobile software) that SCO was setting up garnered a few customer wins, but the names highlighted (Sberbank, a Russian savings bank, George Delallo Co., Atlas Paper) weren't exactly Fortune 500 blue chippers.

As SCO was squeezed on cash, the company's legal woes escalated. Last month, SCO's claims were eviscerated in a 102-page ruling.

Dan Farber reported on August 11:

For the last several years, SCO has been engaged in lawsuits against IBM and others, claiming that parts of Linux violate its alleged copyrights to Unix. In its lawsuit versus IBM, SCO alleged that IBM contributed portions Unix code owned by SCO to the Linux community.

The ruling, which named Novell as the owner of the Unix and Unixware copyrights, could make SCO give up its four-year effort to extract royalties from Linux providers. Novell acquired Unix from AT&T in 1995.

In March 2004, SCO wanted to charge users for an SCO intellectual property license–$699 per single-processor server–to use Linux and dodge any legal action.

During the same time period, SCO filed lawsuits against auto parts retailer AutoZone for violating SCO’s Unix copyrights by running versions of the Linux operating system that “contain code, structure, sequence and/or organization from SCO’s proprietary Unix System V code in violation of SCO’s copyrights.” DaimlerChrysler was also sued for alleged violations of the automotive company’s Unix software agreement with SCO.

Both Microsoft and Sun paid SCO for licenses related to the Unix copyright claims in 2003.

That August ruling was really the bankruptcy blow for SCO, which largely bet the company on winning its court case. However, SCO's court track record wasn't so grand. In June 2006, a Utah judge threw out hundreds of claims made by SCO against IBM. IBM had launched counterclaims and sought copyright rulings on SCO's suit.


Topics: IBM, Linux, Operating Systems, Software

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    Good riddance to an irrevelant company.
    • Allow me to second your "bwahahaha"

      Rather than bankruptcy though, it would be preferable if they would just close their doors and go away forever. Oh well.... guess we don't have to worry about sleazy lawsuits from them for at least a little while. Morons.
    • I'll third that (nt)

      nt = no text
    • irrelevant to who?

      Irrelevant to whom? Certainly not to thousands of end-users, including many that I support, whose only alternative to SCO Unix is NOT some flavor of Linux but is instead, Windows Server. I have nothing against Linux. It simply isn't a viable option for the software I support. SCO is.

      It is clear that a large number of Linux "enthusiasts" who believe that "Linux is the answer!" never take time to ask, "What is the question?" The question has to be, "Will Linux provide a solutin for me?". If a program vital to a user hasn't been ported to Linux, then it is Linux that becomes irrelevant.

      Were the "powers that be" at SCO stupid and greedy? Absolutely.
      Does SCO produce stable, quality operating systems? Absolutely.

      The two facts are not mutually exclusive.

      Those of us who use and support SCO operating systems have greater reason than those who don't to be upset with the morons who caused this situation. If the company doesn't survive to emerge from chapter 11, nobody with an active brain cell will consider this a victory.

      I suspect that most of the people who like to trash SCO know little or nothing about SCO products. The are reacting soley to the litigation which was unquestionably idiotic. The reality is that nobody wins if SCO goes down the tubes. Microsoft and the various Linux players will pick up some new business but the big loosers will be end users.

      Do you really want to cheer about that?
      • cheers

        You speak as if SCO were the ONLY Unix provider. That just isn't so. Other companies will take up the slack
        Insight Driver
        • reply

          And you speak as if other other versions of Unix are interchangable with SCO and/or each other. THAT just isn't so.

          Just as there are programs written for Windows 2000 that won't run on XP and many more programs written for XP that won't run on Windows 2000, the software I support requires a specific version of Unix: SCO OpenServer. It won't even run on SCO Unixware.

          If SCO goes down the tubes, there won't be another Unix provider to step in and "take up the slack". There will just be a void. And it won't be other Unix providers who will step up and deal with problems of incompatibility. In the case of the software I support at least, it will be the developers who will have to do a major rewrite of their code.

          The reality remains, and my original point was, that, except for the lawyers who took SCO's money and led them down this path, nobody wins if SCO fails. The people who are pissed at SCO because of the litigation will have parties and tell each other that the world is a better place while developers, support staff and end users will be left holding the bag.
          • And so it goes........

            With Microsoft partners.... whether behind the scenes or out in the open.

            We weep for them all!

            Who will be next?
            Ole Man
          • re: Those left holding the bag...

            ... didn't make their plight known to the providers of the system that they were wholly dependent on? Talk about blaming the victim! Did they not care about the end users (or their sales to and support contracts with those end users and support staff?) Were they unwilling to port to a platform that was going to survive? (In truth, "SCO" Unix may survive once The SCO Group is dead. What one agent can sell, another can sell, possibly as well or better.) Did they not see the trap of not writing portable code?

            You have every reason to feel bad. Just not about Linux and it's supporters who are pleased that this attack on their community failed. Your community may suffer but not because of Linux or its supporters. But don't hesitate to feel bad if you see it as being appropriate.
            Still Lynn
          • dependency gone wrong

            Quote: And you speak as if other other versions of Unix are interchangable with SCO and/or each other. THAT just isn't so.

            If your company is reliant on one version of Unix, then that is a shame. Seems, though, that a good programmer should be able to find a work around for whatever dependency their may be.

            All in all, you are a tiny insignificant minority that is directly affected by the actions of SCO. By defending them and using the argument that you are dependent on them is just too bad.
            Insight Driver
  • RE: SCO files for bankruptcy

    This was expected. I see they're still optimistic enough to file a Chapter 11, but they're going to need some very lucky breaks to avoid liquidation.

    Always tragic to see a company go under due to management stupidity. Amazingly enough, I still hope it can be avoided, but I don't think it will.
    John L. Ries
    • RE: SCO files for bankruptcy

      SCO filed for Chapter 11, but now the bankruptcy court, Novel and IBM have all filed briefs asking the court to convert them to Chapter 7.
      Insight Driver
  • Buh-bye!

    Don't let the door hit ya where the good lord split ya! ]:)
    Linux User 147560
  • RE: SCO files for bankruptcy

    I guess M$ has closed it's Change Purse, so no more pennies for SCO !!! Couldn't have happened to more deserving guys !!!

    I wonder, where do we GNU/Linux users send our "License Fees" now ???
    • Give it a rest already!

      Why must the ABMers always introduce Microsoft into discussions that don't involve
      them? Are you really that insecure?
      • Perhaps...

        It has something to do with Baystar's funding (of SCO) and their Microsoft "attachment."
      • MS has long been suspected...

        ...of being SCO's patron in its anti-Linux crusade (Eric Raymond called SCO MS' sock puppet). Don't know whether or not it's true, but I do find it interesting that MS has adopted the same threatening posture toward Linux users that failed so spectacularly for SCO (like maybe Ballmer is trying to do correctly what McBride bungled).
        John L. Ries
        • It's not the same.

          "Don't know whether or not it's true, but I do find it interesting that MS has adopted
          the same threatening posture toward Linux users that failed so spectacularly for SCO
          (like maybe Ballmer is trying to do correctly what McBride bungled)."

          And it's irrelevant. There was no need to bring Microsoft into this. Except for some
          lame cheap attempt to blame them, again, for all that ails the world.
          • Horse pucky

            This is ALL about Microsoft. They were using SCO as a proxy to tarnish Linux
            which they certainly see as a threat. It was Microsoft money that financed this
            courtroom jihad.

            They ARE to blame, plain and simple. This was all about trying to make people
            nervous about Linux so they wouldn't dump Windows. How hard is that to figure
          • Rubbish.

            I've tried Linux and, despite being an avid fan of it for years, had applications that would not run or would run too slowly under (insert name of one of four Windows emulators here).

            Vista isn't perfect, but it will run all my apps.

            I do recall the SCO lawsuit, and knew it was frivolous at the time.

            And, lastly, Microsoft knows it's the applications that keeps the OS in dominance. Why else did app developers, during the 1990s, ditch other platforms? Nobody was buying those platforms, sad but true. And I was an avid user and fan of the Amiga...
          • Shut up with the MS is to blame...

            I use Linux (as a DMZ as it does not server my needs for anything else). But, blaming MS for this is a hipshot just to make some noise not actually hit anything.

            Did MS send funds to SCO? Wouldn't surprise me. But, wouldn't you fund someone who was fighting agains't the biggest threat to your power?

            And don't say no. Because if Linux was the leader and someone threatend it wouldn't you back their opponent to help them out? And don't say no... Because all of te Linux nuts advocate that.

            Look I use all of the OSs. They all have their best applications. Do I like SCO? NO They're a bunch of idiots trying to make money off of stuff that is not necissarily theirs.

            So lets take this damn argument to where it really belongs and howl at the stupid SCO execs who wanted to make money of stuff they shouldn't have made money off of in the first place.

            I other words put the blame where it belongs... On a group of money hungry execs who figured they could make money off of claiming crap that they didn't own. And now they're paying for it. Good riddance, Sco should suffer what ever comes to them.