SCO Bankruptcy "Imminent, Inevitable"

mattaw writes "From analysis by Groklaw it seems that SCO may owe Novell nearly all the SCOSource licensing fees, and has been hiding the fact for 3 years. Imminent. Inevitable. Bankruptcy. Those are the words from Novell's lawyers. Perhaps the IBM/SCO case could close earlier than planned? Perhaps we can finally be rid of this specter once and for all?"

Can they drop the suit?

[GodInHell (258915)]

Perhaps we can finally be rid of this specter once and for all?"

Unless a "plausible" suit would be considered an asset by a bankruptcy court? I know the court won't let you give away corporate property generally.. anybody know?

-GiH

Re:Can they drop the suit?

[timeOday (582209)]

Maybe SCO should sell bonds against the anticipated damages IBM will be paying once SCO wins the lawsuit... Ha ha ha ha.

Re:Can they drop the suit?

[by Anonymous Coward]

"Bonds against damages awarded in lawsuits" are effectively what shares in SCO have been for years. SCO has been loss making for years now, and makes little revenue, certainly when compared to their liabilities in lawyers' fees. So the only realistic sources of value in the company are the lawsuits: and thus the share price can be seen as the market's view of how likely a SCO win is. Its current share price is $1.19 [yahoo.com], giving a market cap of $25M. Since it's requesting at least $5 billion in damages, the market's view is that this outcome is a 40/1 shot. That's long odds in a 2 horse race.

Correction

[Zenaku (821866)]

I think. Therefore, I am not a stock broker.

Re:

[Alsee (515537)]

thus much more risk than an average broker would be willing to absorb

I do not think it reasonable to equate current SCO shareholders with "an average broker". Any current SCO shareholder would be so far off the norm to make any rational evaluation impossible. That is not an anti-SCO-biased claim... that is a simple fact based on the stock price history. Any stock with that sort of price history simply would not be held in the portfolio of any average risk-adverse investor. A stock that has fallen from over

Opportunity for Novell

[N8F8 (4562)]

Wait till death is at the door, buy them out for pennies and introduce existing SCO customers to SuSE!

Re:Opportunity for Novell

[Albanach (527650)]

introduce existing SCO customers to SuSE!

Both of them?

Re:

[bhiestand (157373)]

introduce existing SCO customers to SuSE!

Both of them?

Brooks/Eckered Pharmacies and McDonalds both run SCO UnixWare systems ... both as central store processing servers/interfaces

I know this is nitpicking, but it might have sounded better if you had mentioned a third customer to refute the argument...

I'm excited

[digitalunity (19107)]

But I feel bad for SCO's real employees. Like the software developers who actually worked to make a good product at one point in time.

Hopefully Novell and IBM can split the leftovers, I think it's owed to them.

Re:

[gstoddart (321705)]

But I feel bad for SCO's real employees. Like the software developers who actually worked to make a good product at one point in time.

I believe, that in it's current incarnation, SCO doesn't have any such employees. When they were the Santa Cruz Organization, they had such people. But, I believe the current SCO is a holding/IP company who doesn't actually do such mundane things as writing software. I think it's been about a decade since SCO had coders in its employ.

(If people have more accurate informati

Re:I'm excited

[Amazing Quantum Man (458715)]

The current SCO is not, and has never been the Santa Cruz Organization.

The current SCO (newSCO) is what used to be Caldera. Santa Cruz (oldSCO) became Tarantella, and was bought by Sun.

About 50 developers?

[rumblin'rabbit (711865)]

SCO's quarterly financial reports say different. They state about $2 million in research and development costs for the last reported quarter. If we assume that to be mostly salaries, then that's about 50 developers. SCO also makes software releases regularly containing many new feature. And now, a moment of silence in mourning over SCO's imminent demise ... that's long enough.

Re:About 50 developers? - way too high

[rumblin'rabbit (711865)]

In software development, you may safely assume that developer salaries is the majority of the cost. I know - I'm a manager of software development.

You should go through the list and add up the costs. It's not that great. For example, it's hard to imagine having more than one manager and one secretary per 10 developers. Hardware is dirt cheap (a few thousand per year at most). Electricity and office space likewise, at least compared to a developer's salary. Health insurance is a serious expense, but still only a fraction of the cost.

And if SCO is paying $1.5 million for coffee, the management should be fired tomorrow. A dollar or two per day per employee, that's it.

Trust me, $8 million per year buys a lot more than 10 developers.

Darl

[Mateo_LeFou (859634)]

Alas, it's almost 100% certain that Darl will parlay this experience in the limelight into a cushy job at some other company when SCO's gone. Things are so screwed up...

I personally think Darl should get jail time. I consider him no better than Lay or Skilling.

I know we can hope, BUT ...

[rblancarte (213492)]

... I gotta say I will believe it when I see it.

SCO is like that bug that won't go away or die. When you considering how long they have waited this out, what makes this really any different.

Now, I hope it is true and these guys do go away. But I won't be holding my breath. Keeping my fingers crossed though.

RonB

I doubt it

[thebdj (768618)]

Perhaps the IBM/SCO case could close earlier than planned? Perhaps we can finally be rid of this specter once and for all?

My understanding is the lawyers were paid in advance. Since filing bankruptcy is hardly the end for a company, I do not know that it would necessarily finish off SCO or the IBM case. Actually, someone could come in and purchase SCO with the intentions of keeping the lawsuit alive.

Re:

[j00r0m4nc3r (959816)]

IBM should buy SCO and dismantle them just for spite

Re:I doubt it

[soft_guy (534437)]

IBM should buy SCO and dismantle them just for spite

How do you dismantle a company that consists of a box at Mailboxes, etc., some attorney's on retainer, Darl, and two hookers in a motel room?

In a word: Chainsaws

[no reason to be here (218628)]

(EOM)

NO!

[khasim (1285)]

SCO wanted to be bought by IBM. That would be a "good thing" for SCO. Their stock jumps and their executives all cash out more options.

IBM should crush SCO in court and be awarded whatever is left of the company as compensation.

If IBM gives up any money to SCO or SCO executives, IBM has lost and will be sued again over this same kind of crap.

Re:I doubt it

[BoneFlower (107640)]

While I see the attractiveness, this would be a bad idea.

One, IBM would then face lawsuits from other two bit companies that might have even less of a case, leading to IBM spending even more money on legal fees. The more money they blow defending their linux ventures, the less profit their linux ventures make. This is less money for them, and for us... a greater likelihood that they will eventually pull out of linux entirely. Bad for IBM, bad for us. A decisive win now, good for IBM and good for us.

Two, it would appear to be an admission that SCO had a case. Technically it isn't, but people would see it that way even if the courts didn't. This is bad.

Three, this would encourage other people to go after potential copyright/contract problems related to Linux in courts, rather than approach Torvalds and his crew and say "We've got concerns about this code here" before resorting to a lawsuit.

Four... there are concerns about the GPL actually holding up in court. While I have heard vague references that it has held up a few times, this is a high profile case where one of the largest companies in the world has thrown down GPL violations in its countersuit. Winning on those counts will be a significant boost in public confidence about how well it will hold up, hopefully leading to more people who were considering it actually going with it.

Re:I doubt it

[Bastard of Subhumani (827601)]

Actually, someone could come in and purchase SCO with the intentions of keeping the lawsuit alive.

Bill? What are you doing? He was only joking, honestly, don't do it!

It's more than bankruptcy.

[Jaywalk (94910)]

Judge Kimball has ruled that the Novell case should go before the IBM case, so the Novell timeline [groklaw.net] is now more important than that of IBM. While it's SCO that sued Novell, the whole show (including IBM) is likely to be shut down by Novell's counterclaims [groklaw.net]. Boiled down, Novell's has nine "claims for relief" and, if granted, there is nothing left for SCO to sue about. You can read them yourself in the PDF, but the basics are:

1. Novell owns the copyrights and not SCO.
2. SCO needs to give Novell a full accounting of unreported money it owes Novell for SVRX licenses.
3. Novell wants to court to order SCO to comply with their contract, which gives all the royalties from SVRX to Novell.
4. Novell has the right to waive SCO's claims on UNIX code. Including those against IBM.
5. Novell wants the court to issue a "declaratory judgment" that Novell has the right to audit SCO's performance to make sure that it doesn't take any more of Novell's money.
6. SCO needs to put all the money it "converted" (i.e., "stole") from those licenses into a constructive trust. (This is the one they're fussing about now. Sun and Microsoft gave SCO a bucket of cash to carry on the lawsuit against Linux under cover of a UNIX license. But SCO is supposed to give UNIX license money to Novell.)
7. Number seven repeats number six and asks for the trust again. Eh, lawyers. Go figure.
8. Number eight asks for the trust again, but adds punitive damages for swiping the money in the first place. Since SCO has already spent most of the cash, this is pretty much just adding insult to injury.
9. Finally, Novell wants a complete accounting of all SVRX agreements or "other agreements relating to royalty bearing products." That's because SCO was claiming that the Sun and Microsoft agreements weren't "real" SVRX agreements, so SCO didn't owe Novell any money. Novell wants an accounting to make sure SCO isn't hiding any more ill-gotten gains.

So, yeah, the cash is a big deal and it's going to bankrupt SCO. Couldn't happen to a more deserving bunch of fellas. But read number four again. If Novell has it's way, the IBM case is gone too because SCO never had the right to sue in the first place.
 
Of course, there are always IBM's counterclaims, but it's unlikely there will be anything left after Novell is done.

Re:I don't think they knew.

[Jaywalk (94910)]

Why wasn't Novell doing all of this monitoring and watching in the first place? And why didn't they realize they were getting scammed sooner?

Believe it or not, I don't think Novell knew. The original press releases read like something you'd expect from the Three Stooges. First Novell accepted SCO's version and assumed they had sold the copyrights. Then they said they said they didn't sell the copyrights. Then SCO found a piece of paper in their files that Novell couldn't find in their version and sent it to Novell. Novell read the paper and agreed that it looked like they had sold the copyrights. Then Novell's lawyers looked at the paper and said that they didn't. Eventually, somebody dug up the minutes of a meeting for the Board of Directors from something like a decade ago and decided they definitely did not sell the copyrights.

Keep in mind that nobody was much interested in UNIX by this point. The original deal was between the original Santa Cruz Operation and Novell because Novell wanted out of the UNIX biz while Santa Cruz wanted some stuff so they could do a joint project with IBM. That project didn't pan out, so they renamed themselves Tarentella and sold the UNIX business to Caldera. Novell didn't much care who owned the business as long as they got their checks, which both Santa Cruz and Caldera sent them as per the contract.

Caldera didn't want the UNIX business either. They were a Linux business and thought they could convert SCO's UNIX distribution network to selling Linux instead. That didn't work out either; apparently the UNIX resellers didn't want to switch to Linux and Caldera was making more selling UNIX than distributing Linux. So they ditched Linux (and their CEO) and switched to concentrating on UNIX and changed their name to SCO for the name recognition.

But there was no scam -- at least with the UNIX royalties -- until the whole Linux shakedown started. Santa Cruz and Caldera sent Novell the checks and Novell pocketed the money. The Linux shakedown was just supposed to get IBM to buy them out, in which case it would have stayed business as usual. Things didn't hit the fan until after SCO tried to up the ante by threatening to sue Linux users over UNIX rights. And even then it took a while.

I'd have loved to have been in the Novell staff meeting when someone (I've always pictured a balding accountant with a slight paunch) looked up from his notes and said, "Hey, isn't SCO supposed to be giving most of the UNIX money to us?"

Re:

[Citizen of Earth (569446)]

Actually, someone could come in and purchase SCO with the intentions of keeping the lawsuit alive.

They should allow open-source supporters to make donations to them. Someone should start an organized "Adopt a lawsuit" campaign. It is in our best interest to keep SCO's doors open until it gets trounced in court.

IANAL....

[drdanny_orig (585847)]

.... therefore almost nothing referenced here makes any sense to me. Someday lawyers will be forced to speak and write in NormalSpeak, preferably in English. Until such time, I am at the mercy of people like Cokie Roberts to explain these legal doings. Could /. maybe hire her to boil this down for us mortals?

Re:

[by Anonymous Coward]

if (allegations ==true) { SCO = screwed; }

Re:IANAL....

[gstoddart (321705)]

.... therefore almost nothing referenced here makes any sense to me. Someday lawyers will be forced to speak and write in NormalSpeak, preferably in English.

Unfortunately, lawyers can't use NormalSpeak. The maze that is modern law requires a very large amount of terms with very specific meanings to convery what is being said. It's wrapped up in hundreds (if not thousands) of years of history and the like, and embodies a large vocabulary of concepts, precedents, and methods.

That's why we like Groklaw, becuase they do a very good job of summarizing the legalese, as well as explaining it in context of the issues as they relate to tech.

Sadly, I don't think you'll see your wish any time soon. Legalese is probably going to get more complex over time than less.

Cheers

Re:IANAL....

[fireboy1919 (257783)]

You have a couple of vague terms in your last message that I hope you could clarify:
Define NormalSpeak. New speech codec that only works on English?
Define "legal doings." Lawyer guano?
Define "boil this down." Are you talking about putting legal doings in a bubbling pot of water?
Define "us mortals." Presumably, it means that Cokie Roberts is immortal. Based upon past assumptions, this means that once Cokie Roberts boils down the lawyer guano, it's safe for everone else to use. Do you make bowls out of them or something? Or do you eat it to become immortal yourself?

To be serious, I know what you probably mean. The point is, though, that the language of the law will always be with us. It helps let one say exactly what they mean without room for interpretation, or to fit all interpretations that they want it to fit.

Re:

[bhiestand (157373)]

The legal language is exact and well-defined.

Ok, I'll follow along...

The perceived "slipperyness" of lawyers is a side-effect of their function: To help their employers present effective arguments for the most-favorable-to-them interpretations of legal matters in dispute.

You mean to say that the job of a lawyer is to exploit the fact that laws, as written, are open to interpretation? That doesn't really sound very "exact" or "well-defined" to me. Certainly there is a lot of technical jargon involved, and some terms are very specific but, overall, I can't think of a single law, article of the constitution, or amendment which hasn't resulted in someone in the legal system having to interpret exactly what it means. And those interpretations often c

Re: Once more (in English).

[Jaywalk (94910)]

What everybody agrees on is:

• Novell and SCO signed a countract where "certain rights" to UNIX (specifically System V, Release X - SVRX for short) were transferred to SCO.
• In exchange, SCO would give the royalties for SVRX (minus a 5% handling fee) to Novell.
• Novell claims that the "rights" transferred to SCO do not include the copyrights and that Novell still owns those copyrights. SCO claims that the contract does transfer the copyrights.
• SCO is suing IBM claiming that IBM's contributions to Linux infringe S

Law should be open and accessible to all.

[spun (1352)]

The difference is that the internal complexities of other professions rarely bite the common man in the ass the way the internal complexities of law do. The language of law should be open and accessible to all but the most mentally deficient. That is not as important with even the medical, electrical, plumbing or mechanic's professions.

Can anyone explain?

[iambarry (134796)]

I guess I haven't been following this very closely - I'm confused.

What are SCOSource license fees? And why would SCO owe Novell money? What does this have to do with Microsoft and Sun license fees?

I tried to read the Groklaw FA but I'm not getting it.

Anyone care to explain?

Thanks in advance.

Re:

[BoneFlower (107640)]

Basically, SCO has to pay Novell royalties whenever they license the Unix System V code, it's part of the original contract.

Novell is basically saying that SCO hasn't given them all the royalties SCO owes them.

Re:Can anyone explain?

[Scarblac (122480)]

SCO has been acting as if they had bought some sort of IP rights to SysV UNIX from Novell, and sold licenses based on those rights to Sun and Microsoft ("SVRX licenses").

Novell is now pointing at the actual text of the contract, which says that all SCO acquired was the right to act as an agent of Novell - basically, they can sell licenses in Novell's place, then hand over all the money to Novell. After that, Novell will return them 5% of the money as an agent fee.

It all seems pretty undisputable, from following Groklaw. As Novell claims SCO did its job badly so they won't even have to give them the 5% back, they're basically claiming that those cash infusions from Microsoft and Sun belong to Novell. And it's asking the judge to make haste, since this is simply their money, SCO is wasting it, and they'll soon be bankrupt.

It's only a spector

[geekoid (135745)]

Because /. keeps posting it.

Their stock has actually gone up!

[Zontar_Thing_From_Ve (949321)]

I just checked the stock ticker and SCOX has actually risen in price today! It started at about $1.15 a share and it's at $1.22 now, so while they may be in a world of trouble, Wall Street still amazingly thinks the stock has some value. I am amazed that this stock is still selling for over a dollar a share, but far be it from me to suggest that the stock market makes any sense.

Re: Look again.

[Jaywalk (94910)]

SCOX has actually risen in price today!

According to Yahoo [yahoo.com] it closed yesterday at $1.24 and spent the day bouncing around between $1.15 and $1.25, finally closing the day $1.17. That's down seven cents. It's a pretty volatile stock, but the trend has definitely been down as the case wound its way through the courts.

Wall Street still amazingly thinks the stock has some value.

This is not exactly true. I haven't seen a "buy" recommendation on this stock in a long time. I think that the reason for the c

Re:

[Archangel Michael (180766)]

If Novell wins its counterclaims, SCO will cease operations, having no IP to speak of, especially in light of Counter claim 4, which says that Novell sold NOTHING to SCO, but only authorized them to sell licenses for Novell for an agent's fee.

This would mean that SCO falsely represented ownership claims to IBM in that lawsuit, and would have a huge liability regarding that fraud. In addition to all the other IBM counter claims, there is no way either Novell nor IBM would buy anything of SCO, if only to avoi

Resolved by bunkruptcy?

[Edward Ka-Spel (779129)]

I would be really disappointed if the Novell and IBM cases are finally resolved because SCO ran out of money. I would much rather see a final resolution on whether or not Linux has any sort of IP conflict with SCO. Bankruptcy skirts the issue. I would rather see a clean bill of health. Perhaps Microsoft now wants SCO to go bankrupt so that clean bill of health never comes.

They've been doomed for how long now?

[Weaselmancer (533834)]

I mean seriously. We've been hearing variations of the "OMG SCO is teh doomed!" now for so long my eyes just glaze over when I see another one.

Call me when Darl is in jail or flees the country.

Live Sacrifice Required

[Doc Ruby (173196)]

After all this time, money spent by IBM defending/pursuing, and all the defining issues raised, I don't want SCO dying before a precedent verdict is set. The best justice will be for SCO to spend itself bankrupt pursuing this frivolous lawsuit, its frivolous lawyers getting stiffed and wasting more time as creditors in bankruptcy court, and Linux proven free of the FUD SCO has produced as its flagship product. Either way, watching the speculators betting on SCO's stock rising on blackmail is fun, but satisfaction lies in proving the facts about how Linux is free.

Really...

[Y-Crate (540566)]

"The Santa Cruz Operation" always sounded more like the name for a wise-guy scam than something you would name your company.

egregious punctuation

[by Anonymous Coward]

These. Are. Not. Sentences.

Typo

[lbmouse (473316)]

"Perhaps we can finally be rid of this specter once and for all?"

Shouldn't it be "sphincter"?

Next prediction.. SCO sues Tarantella/Sun

[HighOrbit (631451)]

The executives/investors in SCO/Caldera either:

1. Didn't understand what they bought from Santa Cruz (i.e. they thought they "owned" Unix, when they really didn't).
2. Didn't read the Santa Cruz - Novell APA, in which case they are morons for not reading the fine print in a multi-million dollar deal.
3. Understood the APA, but were greedy/crooked enough to try to get away with 'converting' Novell's royalties.

After Novell smacks down SCO/Caldera into bankruptcy, I would bet to see a lawsuit from Caldera's investors against Sun (now owners of the old Tarantella/Santa Cruz) claiming that Tarantella/Santa Cruz mislead them and misrepresented the nature of what they were buying when Caldera bought the Unix assets.

Just for laughs

[PingXao (153057)]

When the SCO fiasco is all wrapped up here's a number I'd like to see: How much money did all the lawyers involved earn apiece? There are hundreds involved, to be sure, but the Top Ten would be enough. Then I want to contemplate whether the fucked up Copyright laws in the U.S. make it all worthwhile. SCO's complaint was worthless from day 1 and it should have taken no more than 6 months to get it laughed out of court.

Ummm....

[rm69990 (885744)]

Ummmm...I'm the one who submits the vast majority of SCO news lately to Slashdot, and I didn't even bother submitting this. Novell has been saying this, either word for word or using different words, since they filed their counterclaims in July 2005. Novell said this directly in their motion for summary judgment a month or 2 ago. Novell is now just repeating itself in a second filing on the same motion (reply memorandum). I never thought I would tag something on Slashdot as slownewsday on the same day as Macworld....

Someone needs to take these guys out

[Sponge Bath (413667)]

Maybe we could hold a fund raiser and hire Hans Reiser.

Re:

[Fordiman (689627)]

But would it run Linux?

Doesn't matter. itsatrap. or fud. or notfud. or whatever.