The SCO Group, which claims to own the UNIX code used in the Linux operating system, is poised to emerge from Chapter 11 bankruptcy with the help of private investors.
Stephen Norris Capital Partners, together with unnamed investors from the Middle East, have agreed to provide up to $100 million to finance a reorganization under which the investors will take a controlling interest in SCO even as it takes the company private.
"Not only will this deal position us to emerge from Chapter 11, but it also marks an exciting future for our business," said Jeff Hunsaker, chief operating officer of SCO Operations. "This significant financial backing is positive news for SCO's customers, partners and resellers who continue to request upgrades and rely upon SCO's UNIX services to drive their business forward."
In Utah's Federal District Court last year, Judge Dale Kimball ruled that Novell, not SCO, owns the copyrights to the UNIX code at the heart of Linux. Kimball's ruling indicates that SCO owes Novell compensation for copyright infringement.
Nevertheless, SCO continues to assert that it owns the core UNIX operating system originally developed by AT&T/Bell Labs, and it claims to be the exclusive licensor to UNIX-based system software providers. According to documents filed in U.S. Bankruptcy Court in Wilmington, Del., a primary purpose of SCO's reorganization "is to encourage and promote an early and favorable resolution of the Novell/IBM litigation."
SCO's investors have agreed to provide up to $95 million to support appeal bonds and other court costs, including any final claims that might arise in SCO's pending cases with IBM and Novell. That $95 million line of credit will be secured by all of SCO's assets, "including all of its present and future litigation claims," the court filing said.
Beyond litigation, SCO's principal investment partner said it has developed a business plan for SCO that includes the unveiling of new product lines for customers worldwide.
"We saw a tremendous investment opportunity in SCO and its vast range of products and services, including many new innovations ready or soon to be ready to be released into the marketplace," said managing director Stephen Norris. "We expect to quickly develop these opportunities, and to stand behind SCO's existing base of customers and partners."
As improbable as SCO's pending resurrection seems, the investment cannot be discounted. "There are always margins to be had from the ruins of a company like SCO," said Linux Foundation spokesperson Amanda McPherson.
"Keep in mind this is a $5 million investment with the rest in a line of credit," McPherson said. "Clearly, Norris Capital sees some value in SCO's future UNIX business, but that value will only be realized outside any litigation."
McPherson noted that Kimball was very clear in his rulings against SCO and in favor of Novell. "We hope that SCO's new investor is focused on the future," she said. "Based on the results from their case, we assume they are."