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SCO blames Linux, bad publicity for its failure

By David Meyer, ZDNet UK on September 20th, 2007

Topics

linux, novell, sco, unix, chapter 11, sec, code, copyright, ibm

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In a statement published this week, SCO Group blames the success of Linux and "negative publicity", as causes for its decline -- the company may need to wind up its operations after its copyright case against Novell collapsed, prompting it to file for bankruptcy.

In August a federal judge threw out a long-running and very expensive case in which SCO had accused Novell of infringing on Unix and UnixWare copyrights that SCO claimed it owned. A month later SCO filed for Chapter 11 bankruptcy protection, whereby the company's assets are protected from creditors while the company is being reorganised under the supervision of the bankruptcy court.

"As a result of both the court's August 10, 2007, ruling and our entry into Chapter 11, there is substantial doubt about our ability to continue as a going concern," read part of a filing with the US Securities and Exchange Commission, made on Tuesday.

The final straw in SCO's financial crisis seems to have been the judge's decision that its 2003 licensing of Unix to Sun and Microsoft means that SCO now owes Novell a share of the fees generated by that business.

The amount in question still has to be calculated by the court -- and Novell's efforts to extract its money are on hold while SCO remains under Chapter 11 protection -- but it could be as much as US$30 million, which is the amount claimed by Novell, including interest.

"If a significant cash payment is required, or significant assets are put under a constructive trust, the carrying amount of our long-lived assets may not be recovered," read SCO's Tuesday statement, which also conceded the dangers of remaining under Chapter 11 protection for too long.

"So long as the Chapter 11 cases continue, our senior management will be required to spend a significant amount of time and effort dealing with the bankruptcy reorganisation instead of focusing exclusively on business operations. A prolonged continuation of the Chapter 11 cases may also require us to seek additional financing.

If we require additional financing during the Chapter 11 cases and we are unable to obtain the financing on favourable terms or at all, our chances of successfully reorganising our businesses may be seriously jeopardised."

The filing also confirmed that the judge's decision had scuppered most of SCO's claims against IBM -- it had claimed that IBM's inclusion of Unix code in Linux infringed upon SCO's intellectual property -- although SCO still intends to pursue a claim against IBM of "unfair competition" arising from the Project Monterey initiative in the late 1990s.

Also revealed in the filing was the scale at which SCO's Unix business has been declining -- for which SCO blames Linux. "Revenue from the Unix business decreased by US$2,704,000, or 37 percent, for the three months ended July 31, 2007, compared to the three months ended July 31, 2006 and revenue from the Unix business decreased by US$5,103,000, or 23 percent, for the nine months ended July 31, 2007, compared with the nine months ended July 31, 2006."

"The revenue from this business has been declining over the last several years, primarily as a result of increased competition from alternative operating systems, particularly Linux, and from the negative publicity of the SCO litigation.

"We believe the inclusion of Unix code and derivative works in Linux has been a contributor to the decline in our Unix business because users of Linux generally do not pay for the operating system itself, but pay for services and maintenance.

"The Linux operating system competes directly with our OpenServer and UnixWare products and has taken significant market share from these products," the statement continued.

David Meyer of ZDNet UK reported from London.

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Talkback

They got what they deserved

If they hadn't tried to sue every body then this would not have happened. The day of the big, expensive, proprietry operating system has gone...

Gnoo nixGnoo nix September 20th, 2007
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reading for Darl and his melody boys

Management of SCO will benefit from ordering PLMAG for the years to come, I presume. http://www.plmag.org/

AnonymousAnonymous September 22nd, 2007
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Finally

Finally Darl McBride gets what he deserves. The whole charade was plain stupid. How do you like THEM apples now Darl? Better start looking for a job at your local Burger King, I hear they still hire washed-out CEOs.

CypressCypress September 21st, 2007
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Please...

You have to be kidding! After all this time and after SCO never showing a shred of proof of "inclusion of UNIX in Linux", they still cling to that claim. A contributor to SCO's decline in their UNIX business is their crappy, outdated OS, and their insane lawsuit. What a bunch of bumbling fools

AnonymousAnonymous September 21st, 2007
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Nice press release

Lots of quoting, zero analysis. Reads like something SCO would have written, right down to the failure to note that SCO's claims in all cases have mostly been either disproven or thrown out for lack of evidence, not to mention the inclusion of the spurious claim of code inclusion without any opposing comment - such as they don't actually have any evidence to provide, even after several years of claiming they did - from the journalist who "wrote" this.

SCO died because SCO bet the farm on a dodgy litigation strategy rather than adapting to the marketplace. They spent all their money on lawyers, a very flimsy (read: nonexistent) case, and hundreds of press releases like this one trumpeting claims that had no basis in fact.

They completely failed to take care of their real business. It was blatant mis-management in their attempt to become the current anti-Linux sock puppet for the likes of Microsoft. Personally, I hope the shareholders realize this, strip the corporate veil, and go directly after the assets of those responsible for this major fiasco.

Marc D.Marc D. September 22nd, 2007
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Poor, poor SCO

A sad day in computing for all is to be had today. I feel the depth of sadness welling up from my feet to my backside but with one quick "fluff", alas it is gone.

No more SCO. Damn!
I'll have to go back to dreaming of the demise of M$ full-time again.

So sad, so sad.

Rex Alfie LeeRex Alfie Lee September 26th, 2007
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