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SCO Group files for bankruptcy protection

By Stephen Shankland, CNET News.com on September 17, 2007

Summary

Three and a half years after launching a high-profile legal attack on Linux, The SCO Group has filed for Chapter 11 bankruptcy protection.

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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 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.

Chief executive Darl McBride said: "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 on 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 US$1.1 million for the quarter ended April 30 on revenue of US$6 million, a decline from US$7.1 million in the year-earlier quarter. Legal costs that quarter totaled US$1.1 million, a major decrease from US$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."

This article was originally a blog post on CNET News.com.

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