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SCO chief confident

Published September 29, 2007 12:00 am

Embattled head of Lindon software company looks ahead
This is an archived article that was published on sltrib.com in 2007, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Losing in court, vilified on blogs and in bankruptcy proceedings, SCO Group CEO Darl McBride still says pronouncements of the death of the Utah software company are premature, if not greatly exaggerated.

Within weeks, McBride said, the Lindon company that filed lawsuits against IBM and then Novell in celebrated battles over ownership and use of software code will have announcements about reorganization plans. He refused to provide details.

"I can tell you that other parties are very interested in our business," McBride said in an interview this week. "We are in discussions. Again, I think our enemies who have pronounced our business' death may want to halt the presses a bit until they hear some of our announcements that will be coming out in the next couple of weeks with respect of how we will reorganize and how we will go forward with our business model."

SCO filed for bankruptcy Sept. 14 under Chapter 11 laws that allow it to reorganize and renegotiate its debts. But McBride said the company will continue to pursue the lawsuits - now suspended because of the bankruptcy - after having prepaid $50 million in legal bills to carry it through trials and appeals.

In March 2003, SCO filed suit claiming IBM breached its Unix source code licenses from SCO by allowing portions of that code to find their way into the Linux operating system, which is known as an open-source program to which programmers can freely contribute. The lawsuit set off a firestorm among the open-source community whose members believe software like Linux should be free to the public. SCO's suit meant that IBM and other distributors of Linux potentially owed fees to the Utah company for use of the Unix code.

SCO filed a second lawsuit in January 2004 asserting that Novell was trying to interfere with its ownership of the Unix copyrights it says it purchased in 1995. But on Aug. 10, U.S. District Judge Dale Kimball tossed out SCO's claim that it owned the Unix and UnixWare copyrights. If left standing, that ruling not only puts SCO's claims against IBM in jeopardy but also leaves it with a potential bill from Novell for Unix fees for as much as $35 million.

McBride said he is confident that ruling will be overturned when the company is able to appeal the case to the 10th Circuit Court of Appeals. He believes the company's case remains strong based on facts and witnesses who could testify.

Beyond the litigation, McBride said the company will continue to market its Unix products and pointed to its recent launch of a mobile software server system for which it sees a big market.

But Laura DiDio, an analyst with the research and consulting firm Yankee Group, wonders whether whatever marketing effort the company undertakes will be harmed by the bad will it has garnered as a result of the lawsuits.

"What happened to them when they undertook this is they became an industry pariah," she said. "In hindsight, I think the biggest mistake that SCO made was try to sue corporate customers. That really set the industry against them."

The company's Unix revenues have been declining for some time, so it is banking more of its future on the new software - particularly its Mobility Server - for mobile devices like cell phones. The Mobility Server allows, for example, a person to keep his or her appointments updated from a smart phone but also allows fellow workers to view it or add to it from other phones or computers.

Bill Hughes, principal analyst of market research firm In-Stat, said he believed SCO's products could make inroads in the mobile services sector.

"To my way of thinking, there's no reason to think SCO wouldn't be successful," he said. "That's a focus for them in the future, and I think they could be successful."

McBride said before the setbacks in court, the company had a strategy in place that would have brought it through successful trials with new cash to market it products. Now, because of the company's cash crunch, SCO probably will seek to enter into agreements with other product providers to market the Utah company's wares, which would reduce revenues but also expenses.

"It ends up that instead of having a bunch of marketing funds to go to market with, this mobility software is more of a lifeboat for us instead of a big cruising steamboat with a lot of steam behind it," he said. "What we have to do is now we get off the lifeboat, figure out how to move forward without a lot of funds."

tharvey@sltrib.com

The SCO Group said Friday it had been notified by the Nasdaq stock market that it could be delisted because its stock has traded under $1 for the past 30 business days.

The Lindon company had previously been notified by Nasdaq that it could be delisted after it filed for Chapter 11 bankruptcy. But SCO said it has been given a Nov. 8 hearing on that proposed delisting, staying any action until after the hearing.

The company's stock closed Friday at 17 cents a share, down 1 cent from Thursday.