SCO May Close Shop

After being an industry mainstay for more than a quarter of a century, it looks like legal battles (some of which they initiated) may finally have doomed SCO, who filed for Chapter 11 as we reported earlier this week.

At the time it was assumed that SCO would come out of the bankruptcy proceedings with some sort of payment plan and schedule and eventually get out of the red.  Sadly, that may not be the case, and it seems that a lot is riding on how much the recent debacle with Novell is going to cost them:

"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 U.S. 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 Microsystems 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 $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 reorganization 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 favorable terms or at all, our chances of successfully reorganizing our businesses may be seriously jeopardized."

While there are certainly some who are not displeased to see SCO in trouble after filing so many seemingly dubious law suits against other major players in the tech industry of late, they are still an industry cornerstone.  The IT industry as a whole has seen huge names fall in the past, either into complete failure or just relative obscurity, but either way it is very reminiscent of the American automotive industry around the time of the Great Depression.

We'll keep our fingers crossed that not only does SCO make it out of this in one piece (while paying Novell their dues), but that SCO and others in the industry learn something from the entire experience.

Tags:  OS, SHO