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02 January 2009, 14:49

SCO: The same procedure as last year?

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The SCO Group, currently sheltering from its creditors under Chapter 11 of the US bankruptcy law and still legally embattled with Novell, IBM and Red Hat over rights to Unix, as well as over code alleged to have been copied illegally from Unix into Linux, has evidently allowed an important deadline to slip by. It was supposed to submit a business plan to the bankruptcy court by 31 December, covering its own reorganisation and a settlement with its creditors. That means the company's further destiny now lies in the hands of the judge. If he doesn't grant an extension of time, then in accordance with Chapter 7 of the same law the SCO Group will have to go into liquidation in March 2009.

SCO applied for protection from its creditors under Chapter 11 in September 2007. US law limits the period of such protection to 18 months, during which a company can reorganise itself and seek a new beginning with new investors, without its creditors having full access to its assets. It has to submit a feasible business plan that the judge sitting on the bankruptcy case finds acceptable.

Executives within the SCO Group have periodically dropped hints about possible reorganisation models. One such was the announcement in February 2008 that a group of investors led by Norris Capital Partners would be injecting $100 million, in order to permit the "pursuit of legal claims to their final solution". But this amounted only to an announcement that the various disputes, over Unix copyright and Unix code that may have been copied illegally into Linux, would be continued. The lenders from the Near East, much cited by SCO, were in particular never heard of again. SCO finally postponed the SCO Forum, supposedly to enable it to present a new investor. When the event at last took place, a rescue plan was presented but no specific investor was mentioned despite the previous promises. The rescue plan was based on the idea of "SCO Operations" continuing the software and programming business, while the SCO Group pressed on with the legal disputes with Novell, Red Hat, IBM and some other firms.

Although the deadline for submitting its reorganisation plan expired at the end of the year, SCO seems confident that it will still be able to find investors, despite the crisis on the capital market. Jeff Hunsaker, President and Chief Operating Officer of SCO Operations, is quoted in the web magazine SD Times, for example, as saying the company has a plan that can save it from the impending bankruptcy proceedings, though he did not wish to disclose any details. The article goes on to speculate about the strategy being followed by Novell. Since obtaining a court victory against the SCO Group, Novell is that Group's major creditor. The court found that Novell had not sold the copyright in Unix when it sold Unix development to SCO. Novell is consequently entitled to a share of SCO's earnings from licensing Unix. Novell has many times attempted to enforce its claims in the bankruptcy court, before SCO's assets are totally exhausted in the administration of its bankrupt estate.

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(Detlef Borchers)


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