Posted on 09/20/2007 8:59:39 AM PDT by ShadowAce
A few days late, SCO finally released its financial report, Form 10-Q, on Sept. 18 for the quarter ending on July 31. The news was bad. How bad? SCO admits that "there is substantial doubt about the company's ability to continue as a going concern."
According to SCO's 10-Q report to the SEC (Security and Exchange Commission), SCO's losing its claims to Unix's IP (intellectual property) to Novell in the U.S. District Court on Aug. 10 and its recent court filing for Chapter 11 bankruptcy, make it questionable that the company will survive.
Others, who have been following the case closely, agree. Once SCO filed for Chapter 11, they saw this as not just the beginning of the end, but the end for SCO.
In particular, SCO noted in its 10Q that the judge in the Novell case was going to "determine what portion, if any, of the proceeds of the fiscal year 2003 SCOsource agreements is attributable to SVRx technology and should be remitted to Novell. The range of the payment to Novell could have been from a de minimis amount to in excess of $30,000,000, the latter amount being the amount claimed by Novell, including interest." In addition, "Novell has sought to impose a constructive trust on the company's current funds derived from these sources, which could result in a freeze of the company's assets, and the Court indicated that it would address that issue as well."
In his statement to the bankruptcy court in Delaware, SCO CEO Darl McBride expanded on this, saying, "Novell claims that it is entitled to the full amount of the Microsoft and Sun payments and to all other SCOsource agreements, which, collectively constitute a principal amount in excess of $26 million, and, with claimed interest, in excess of $37 million. Novell also seeks the imposition of a constructive trust on whatever such funds are currently in the Debtors' possession can be properly traced backed to those transactions. The entry of a substantial judgment against SCO would likely impair the Debtors' ability to conduct their business in the ordinary course and the value of SCO's litigation claims relating to infringement of its intellectual property rights in Unix."
In short, if SCO hasn't frozen the Novell lawsuit with its Chapter 11 filing, SCO might well have ended up either owing, or having its assets locked up in a trust, for far more than the company is currently worth.
At the same time that Novell was smashing the foundations of SCO's anti-Linux lawsuits by reclaiming the rights and payments for Unix's IP, SCO Unix business was collapsing. "Revenue from the UNIX business decreased by $2,704,000, or 37%, 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 $5,103,000, or 23%, for the nine months ended July 31, 2007 compared to the nine months ended July 31, 2006."
SCO blamed the "increased competition from alternative operating systems, particularly Linux, and from the negative publicity of the SCO litigation," for these declines. While SCO has been cutting its operating costs, it's not been enough. The company's Unix losses have continued to increase. In this last quarter, SCO lost $1.355 million.
In addition, McBride said at the SCO Chapter 11 bankrupcy trial, that the "success of SCO's UNIX business will, in large measure, depend on the level of commitment and certification it receives from industry partners and developers. In recent years, the company has seen hardware and software vendors as well as software developers turn their certification and application development efforts toward Linux and elect not to continue to support or certify SCO's UNIX operating system products."
McBride continued, "This trend continued for the company's fiscal year ended October 31, 2006, and it continues during the year ending October 31, 2007. If this trend continues, SCO' s competitive position will be adversely impacted and future revenue from UNIX business will decline."
SCO's other revenue lines have also fallen apart. SCOsource, which made money from licensing Unix IP rights, had already dropped to zero for the last quarter. This happened even before SCO lost its claims to those rights.
At the end of the quarter, SCO reported a net loss of $2.398 million. This is better than the last quarter, but still not enough of an improvement, in light of everything else that is happening, to give SCO's leadership any optimism for the company's future.
Ya think?
LOL! Personally, I knew it back in 2003. It’s just that SCO is finally admitting it.
I’m thinking that suing your own customers is not a good business plan.
Make that “SCO” and “bad spelling poor little common folk and nonbusiness groupies”
In further news: Pope admits to “Catholic Tendencies,” and bears admit to “pooping in the woods.” Film at 11.
In 2003, they filed a lawsuit against IBM, saying that Linux infringes on their copyrights, and that IBM was inserting Unix code (Which SCO claimed as their own) into Linux. However, they never provided any proof at all, hoping to coerce IBM into just buying them out to make them go away.
IBM decided to crush them instead.
The SCO Group (SCO), not to be confused with the original Santa Cruz Organization (SCO), is essentially a business entity that exists for the sole purpose of filing frivolous lawsuits against IBM and Linux users.
After having the vast bulk of their claims dismissed in court because they don't even own the intellectual property that they claim was misused, it's no surprise that they're folding, as lawsuit extortion was their only source of income. (Plus, it served as a nice stock pump-and-dump scheme targeting the rubes who thought a big payday against IBM was coming.)
This company DESERVES to go under. For the past several years, it has probably spent more money suing others rather than innovating. Why am I not surprised ?
If you don't know who SCO is, then you probably don't care. (Not that there's anything wrong with that.)
Basically, Linux is an operating system that is "open source", i.e., the source code to it is available to anyone.
SCO corp. contended that they actually owned a portion of the code within Linux (though they have shown no evidence of that beyond wild allegations in the press), and they threatened that everyone who used Linux owed money to SCO.
At this point, they have more lawyers than programmers, and that's always a bad sign.
Looks like Microsoft has pulled the plug on them.
The problem for Microsoft is that they're not going to get off that easy.
The bankruptcy filing postponed, only temporarily, the scheduled trial in Judge Kimball's court on the question of 'allocating' (between UNIX licenses versus other creative consideration) the $$ in SCO's license with MS.
What's going to happen in that trial is that Novell will, as plaintiff, 'prove' the total amount paid, and then assert that all of it belongs to Novell.
SCO will carry the burden of proof to prove otherwise.
SCO will have to, once Novell rests its case-in-chief, put on afirmative evidence that MS was paying $$ for other things of value, i.e., not UNIX rights, etc.
One of those witnesses is going to have to be Microsoft, or else someone in SCO who negotiated with Microsoft (that would be, in and of itself, a weaker presentation).
In either event, Novell will come back with a withering cross-examination, pulling out all the stops to show what SCO and Microsoft were REALLY up to.
It's not going to be pretty for Microsoft. That HAVE to do everything they can to prevent that day in court from ocurring.
Novell knows this, and so the cost (to Microsoft) of negotiating that day away is going to be very high.
This is not necessarily and admission that they are going under. Companies use this boilerplate language whenever there is even a remote chance of that possibility because otherwise if they really do go under they can be sued for deceiving investors. So companies always make it sound like things are worse than they are to protect themselves.
and should be an
Sorry
Better yet - www.groklaw.net -
This site has the entire history of the lawsuit - including all the fillings in HTML (converted from PDF) for easy viewing.
Bottom line -suing your customers has never been a wining business idea. (someone should tell RIAA and MPAA!)
Ive met quite a few SCO users who would have continued using it even with Linux on the market. When SCO decided to start the case SCO v. World that they were destined to lose they took a company that may have been able to turn around and eek out a niche in the market and signed its death warrant.
Lesson (1) to small struggling companies out there: a frivolous lawsuit no matter how much its for will force IBM to settle.
Lesson (2) to small struggling companies out there: Never sue a company because they stop using your product do the grunt work needed to win them back, pucker up, offer deals, and meet their needs.
Lesson (3) If you are going to claim IP infringement by multiple companies be prepared to show what IP is being infringed upon or prepare to get eviscerated in the court of public opinion and the court of law.
Uhm - the Novel and IBM suits are on hold during the Bankruptcy proceedings. SCO has managed to delay the game yet again with this move. I suspect that Novel is going to be taking their case to the bankruptcy court and we may see them get to the front of the line since it’s already been decided by Kimble that SCO is guilty of conversion of Novell’s funds, i.e. they stole money from Novell.
Sure you want to take the Red Pill? the truth is pretty ugly sometimes ;)
Thanks, for the explanation....and posting the thread. (SA/FR :)
Ummm.....you sure about that?
Good riddance to contemptable jerks
I highly doubt that, Novell and MS are in bed now (not that there is anything wrong with that). The deal they penned with MS gives them IP rights to some things which will make their implementation of tools like XEN better than anyones elses.
A far more likely scenario is MS will pay Novell off on the back end to go easy on sco..
eeek...
“Lesson (1) to small struggling companies out there: a frivolous lawsuit no matter how much its for will force IBM to settle.”
That should be ‘Will *NOT* force IBM to settle’
I'm starting to believe that MS was playing both sides of this. Backing SCO in the lawsuit, and dealing with Novell to prevent any backlash...
Well nobody here ever said MS was stupid...
So they're a patent troll? I'm glad they're going under in that case.
Well nobody here ever said MS was stupid...
Of course I know that, but that 'hold' will be lifted, I predict, at the next court hearing in the Bankruptcy court. The judge has already invited Novell to bring that motion.
The reason why the Bankruptcy judge will grant the motion is that Novell is not truly a "creditor", and therefore doesn't have to wait in the proverbial line with other creditors.
They're not a creditor because they didn't "lend" SOC money, i.e., alienate their rights to the UNIX license money and allow SCO to control it via a promise to repay. No, SCO was a fiduciary, collecting Novell's money on Novell's behalf, with a duty to turn that Novell money over to Novell (100% of it) and then, and only then, earn a 5% fee.
That's why Judge Kimball has already ruled that SCO is guilt of conversion. Conversion is THEFT. SCO has already been found the have, in effect, STOLEN Novell's money -- the trial was going to be only about how MUCH money SCO had stolen.
Now --do you think if a thief declares bankruptcy, that a bankrupty court allows the thief to avoid prosecution and restitution, and allows the thief to keep the stolen money?
And do you think and that the bankruptcy court would allocate that stolen money to the other creditors of the thief?
To ask the question is to answer it.
That and the fact that you were selling something you didn't actually own. I learned that the hard way when I opened Krazy Karl's Used Kars in my company's parking lot. I had great prices on the cars I sold until I sold my boss's Jaguar.
I hope this “patent troll” dies and goes to corporate hell.
We seriously need to
1. reform so-called “intellectual property” patent law
2. decimate all lawyers (and purify our society of this disease)
So Sad....../s
Who knew?
My cousin did some consulting work for Caldera and SCO. He was never paid.
The more I learn about Davie Boies and his Orlando law firm, the more I like him.
He managed to turn Big Al-I-won-FL into Big Al-turd-loser and his representation for SCO’s attacks on IBM, Novell and Linux ended up causing SCO to file for bankruptcy on Friday. Guess Boies won’t be collecting the $287K SCO owes him anytime soon and Boes might as well use the certificates for 400,000 shares that SCO gave him to wipe his @ss.
I’m supposed to know what SOC means?
For the most part, if it would matter to you, yes, you would. And I believe you mean "SCO" rather than "SOC"
tagline change
So the foreign clone of American Unix called Linux causes another US Unix company to declare bankruptcy, this is at least the third I’ve heard of. Therefore instead of US businesses selling US Unix software to the rest of the world like we used to, they can all just use this free copy of our technology instead, right? So which US company that sells software are we supposed to want to be destroyed next? All of them, unless they give their software away for free too?
Ah, while Linus Torvalds originally developed the Linux kernel, Linux is hardly a foreign operating system. It’s used in servers, desktops, routers, video game systems, supercomputers, embedded devices and mobile phones.
Linux has a 12.7% market share. It is supported by IBM, HP, Sun Microsystems, Dell, Novell, Red Hat and others. Do these folks know something you don’t?
Well Richard Stallman is the American who owns more copyrights in Linux “distributions” than anyone. He’s also a radical green party leftist, ever heard of him?
Yeah, Vista runs dog slow on current hardware, forcing people to upgrade and buy new hardware, which makes the hardware manufacturers happy, which makes them write their new drivers primarily for Vista. This is proof that MS is stupid?
So why is their stock still trading so high? Eighteen cents a share is still about seventeen cents too many.
Or it causes people to stay with what they have, switch to OSX or wait for the next windows.
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