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SCO Group Denies Its Demise Is Imminent
Posted on Tuesday, January 16 2007 @ 07:45:34 EST by linuxwiz |
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The chief executive of controversial Unix vendor SCO Group Inc has
written to its partners and customers in an attempt to reassure them
that it is not about to go out of business.
To paraphrase a line from Mr Twain, the rumors of our death have
been greatly exaggerated, wrote Lindon, Utah-based SCO's Darl McBride
in a letter that was recently filed with the Securities and Exchange
Commission.
While McBride's letter did not mention any suggestions of its demise
directly, it can be seen as a reference to recent claims made by Novell
Inc in their ongoing battle of the Unix copyrights. Waltham,
Massachusetts-based Novell recently declared in a court paper that
SCO's bankruptcy was both "imminent" and "inevitable."
The demise of SCO has been rumored since it launched its legal
claims against Linux and IBM Corp in 2003, but while McBride admitted
that legal expenses have weighed the company down, he insisted that its
demise is far from certain.
"We recognize we have invested heavily in protecting our intellectual
property. While we expect to continue incurring legal expenses in 2007,
our expectation is that those expenses will be less than they have been
in prior years," he wrote. "Some of the larger expenses related to IBM
discovery, expert witness and technical expert reports are now behind
us. With these expenditures behind us, the outlook for the company's
cash expenditures for the upcoming fiscal year is in a very manageable
position."
SCO had cash and cash equivalents of $8.8m at the end of its third
quarter 2006 when it made a loss of $3.6m on revenue of $7.4m. It will
report its fourth-quarter and full-year 2006 figures later this week.
The company is also rumored to be announcing a workforce reduction and
other plans to cut costs.
Novell is especially interested in SCO's financial position given that
it claims it is entitled to 95% of the $25.9m SCO made from its
SCOsource licensing business in royalty payments.
In October 2006, Novell filed for summary judgment that it was
entitled to the majority of the money SCO earned from its SCOsource
Unix intellectual property licensing program, referencing the terms by
which it sold its former Unix business to Santa Cruz Operation Inc in
1995. Santa Cruz later sold the business on to Caldera, which changed
it name to SCO.
Novell also asked the court for an injunction placing the money in a
constructive trust should its request for partial summary judgment
fail. SCO has denied that Novell is entitled to the revenue, but in
response admitted that it needs the funds to fight its case against
IBM. "The relief Novell seeks would bind SCO's hands just when SCO
needs the flexibility and resources to devote to the SCO vs IBM
litigation," it stated in an October court filing.
Novell took that as an indication of how important it is that the
court grant its request for a trust to ensure that SCO cannot spend the
money. In a court filing earlier this month, it argued that "contrary
to SCO's assertion that a preliminary injunction should be denied
because it may accelerate SCO's bankruptcy, SCO's imminent bankruptcy
is a compelling reason to grant Novell's motion. "For SCO, bankruptcy
is inevitable; it characterizes its assets as merely those 'remaining'
and does not rebut Novell's arguments that its bankruptcy is imminent,"
it added.
In his letter, McBride insisted that SCO is in better health than some
would believe, maintaining that "the vantage point of the CEO's office
provides a perspective that others are not giving." Hardware partners
continue to support and certify their servers to the company's UnixWare
operating system, he insisted, while he said its Me Inc mobile software
is attracting new customers.
"We are committed to operating our Unix business on a cash flow
positive basis and we will make any necessary adjustments in our
business in 2007 to accomplish that. With the combination of our
existing Unix business coupled with our new Me Inc mobile products and
services, I believe SCO is positioned to see improved results during
this fiscal year," he wrote.
While court activity has not exactly been going in SCO's favor (in
December the judge affirmed an earlier ruling to throw out 198 of the
293 items of evidence SCO filed with the court), McBride also
maintained that the company is not ready to raise the white flag just
yet.
"Our efforts to protect our intellectual property continue through
the legal system. We continue to believe in the merits of our cases
with IBM and Novell and look forward to a successful resolution of
those claims. Although we have had a few setbacks in the court
proceedings, important and significant claims remain in the case," he
said.
Source
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