SCO's Finances May Come Crashing Down

Computerworld - In August, Darl McBride, The SCO Group Inc.s president and CEO, declared it one of the more exciting times ever for the software vendor. But by last week, the excitement had taken on a whole new dimension.

SCO filed for Chapter 11 bankruptcy protection on Sept. 14, a month after a federal judge ruled that the copyrights to Unix are owned by Novell Inc.  not by SCO, as it had claimed.

The ruling dealt a serious blow to SCOs four-year-old copyright infringement case against IBM and put the company at risk of having to pay Novell more than $30 million in licensing fees paid to it by Microsoft Corp. and Sun Microsystems Inc.

The bad news continued last week. On Tuesday, SCO said in its third-quarter 10-Q statement to the U.S. Securities and Exchange Commission that there now is substantial doubt about the companys ability to continue as a going concern.

In addition to the fallout from the court ruling, the 10-Q noted that SCOs revenue fell 37% year to year in the third quarter and that the companys SCOsource technology licensing business had no sales at all.

And on Wednesday, SCO said it had been notified by Nasdaq that its stock will be delisted on Sept. 27 unless the company can convince an appeals panel that it has a viable business plan.

Dan Kusnetzky, an analyst at Kusnetzky Group in Osprey, Fla., said that following the judges ruling in favor of Novell, SCO is facing a court battle where almost every single one of their [legal] pillars has been pulled out from under them.

The lawsuits against IBM and Novell were aimed at forcing Linux vendors to sign licensing deals. But SCOs financial results have been on the decline since it began the legal fight, said IDC analyst Al Gillen.

New mobile applications software developed by SCO looks interesting, Gillen said. But the big question, he added, is whether they can stay alive to market it.

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