SCO’s Last Bankruptcy Straw

We now know what finally motivated SCO to pull the
trigger and file for bankruptcy protection. In an SEC filing, SCO reported continuing losses and lamented the recent courtroom setbacks that have hobbled the embattled Unix vendor.

SCO said its net loss for the third quarter of 2007 was $2.5 million, or
$0.11 per diluted common share, which was actually an improvement over the
$3.5 million loss that it reported for the third quarter of 2006.

A decline in revenue accompanied the reduced loss. SCO reported
revenue of $4.7 million for the third quarter of 2007, which is a decline
from the $7.4 million reported in the same quarter a year ago. SCO attributed the continued decline in revenue to competitive pressures against

SCO’s filing also revealed how little SCO actually has in terms of current
assets. As of July 31, 2007, SCO reported that its total assets amounted to
only $15.8 million.

In its SEC filing, SCO noted that the Aug. 10 decision in favor of Novell had the effect of significantly reducing or
eliminating some of SCO’s claims in both the Novell and IBM cases, and
possibly others.

Novell has been engaged in a three-year battle with SCO
over ownership of Unix copyrights. SCO’s litigation against IBM is based on
the fact that SCO thought it owned the Unix copyrights, which SCO alleged
IBM infringed upon in some way.

SCO reported in the SEC filing that in the trial with Novell, which had been
scheduled to begin on Sept. 17, 2007, the federal judge was to determine
what portion, if any, of the proceeds of the fiscal year 2003 from SCO
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,” SCO stated in the filing. “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.”

But the trial didn’t start on Sept. 17. Instead SCO filed for
bankruptcy protection, which has pre-empted the trial.

That said even with the bankruptcy protection, SCO admitted that
it’s not sure how long it can remain in business.

“As a result of both the court’s Aug. 10, 2007, ruling and the company’s
entry into Chapter 11, there is substantial doubt about the company’s
ability to continue as a going concern,” SCO reported.

Under bankruptcy protection, SCO intends to maintain its business

Novell isn’t likely to give SCO much slack, though.

“We’re exploring our options for pursuing our interests relative to SCO,”
Novell spokesman Kevan Barney said in an e-mail sent to

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