SCO to file bankruptcy plan tomorrow

By Jeff Feinman

December 30, 2008 —

After a great deal of courtroom drama and mounting legal fees, the SCO Group is expected to file its Chapter 11 bankruptcy plan in court tomorrow. Jeff Hunsaker, SCO’s president, wouldn’t provide exact details of the plan, but he said the reorganization will hopefully help the company come out of Chapter 11 bankruptcy, which the company filed for in September 2007.

Utah-based SCO has been up to its ears in legal battles over the years, a notable one being a suit against Novell over who was the true owner of Unix. In August 2007, a U.S. District Court Judge ruled that Novell had retained the copyright to Unix after a 1995 agreement with SCO, declaring Novell the owner of Unix.

Jeff Hunsaker

In November 2008, a federal court judge issued a final judgment in the case, reiterating much of the original order. As part of the order, Novell was granted an award of US$2.5 million, which was increased by $918,122, plus $489 per day after Aug. 29, 2008.

One analyst said SCO is on life support as they may struggle to come up with enough money to pay such a debt.

“We’re running into a year where getting financing or investors is going to be pretty tough, even for companies in pretty good shape,” said analyst Rob Enderle. “Getting SCO out of bankruptcy is going to be difficult.”

Enderle added that once Novell was declared the owner of Unix, the foundation of SCO’s legal actions against other companies was taken away. Unless the company is able successfully appeal the decision, which is a long shot after November's court decision, SCO may have trouble surviving after paying off its debt to Novell.

Hunsaker declined to discuss the size of the award that SCO owes Novell, but he noted that SCO is up to date in fees owed to lawyers. In addition to Novell, SCO also had lawsuits against AutoZone, IBM and Red Hat. Those lawsuits have been stayed until SCO emerges from bankruptcy.

“It’s clearly a challenge of just making sure that we have sufficient cash to continue our operations and continue to do all we can to service our Unix customers,” Hunsaker said. “But it’s not exciting just to survive. We clearly want to grow and flourish and move the business forward.”

One area that can potentially help lift SCO from debt is its SCOsource business division that manages its Unix intellectual property. Some believe that SCOsource may eventually end up as Novell’s property. Enderle said SCOsource would be a sellable commodity, but SCO’s liability may prevent a sale.

“[SCOsource] has some value, and you’ve got a lot of creditors that want money, and it would seem likely that that value would pass to somebody,” Enderle said. “It would seem likely that somebody’s going to figure out how to sell or acquire that property and make it worth something.

“It very well may be that Novell ends up with it. Novell will likely be the primary large creditor and may end up with the software side of SCO if they want it. Some aspects of SCO may live on in another company, but the firm as it currently exists is probably not going to exit [2009].”

If SCO is able to survive past its legal debt, the company might look to grow in the mobile software market. The SCO Mobile Server is a mobile application development and deployment platform that the company says can overcome back-end system integration and security issues. It has an API set that helps developers build mobile applications with accessible corporate back-end data.

Last April, SCO also formed a partnership with training and day-planner product company FranklinCovey, where SCO’s mobile technology provides FranklinCovey’s FCmobilelife smartphone application with data services for creating schedules. Hunsaker said there may be up to 4,000 users of the product, which is also used on BlackBerry smartphones. An iPhone edition is expected to be coming out in January, he said.

Related Search Term(s): finances, mobile development, Unix, Novell, SCO

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SCO vs. Novell decision overturned A review of the Unix asset purchasing agreement led a U.S. Court of Appeals panel to send the matter to another trial

SCO to hold auction as part of bankruptcy plan SCO’s proposed plan will have an open auction to sell off the company’s OpenServer Unix product line and mobile business in order to separate SCO’s intellectual property litigation from its other products. This is the second bankruptcy reorganization plan that SCO has filed.

Novell files objection to SCO bankruptcy plan In the latest chapter of its long-time battle with the SCO Group, Novell filed a deadline-day objection to SCO’s Chapter 11 reorganization plan, citing problems with SCO’s disclosure statement.

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