| SCO goes private, gets $100M to keep going, McBride out? |
Feb. 14, 2008
In every bad horror movie, viewers know the monster is never, ever really dead. Some Linux users may feel much the same way about Unix vendor and Linux litigator SCO. On Feb. 14, The SCO Group unexpectedly announced that it had received $100 million from private equity firm SNCP (Stephen Norris & Co. Capital Partners) to reorganize and continue its business.
SCO, which had been reduced to be trading OTC (over the counter) in the Pink Sheets after having been kicked off the Nasdaq in December 2007, found an angel investor in SNCP and its Middle Eastern partners. In return for the $100 million to reorganize, SNCP will take over the company and take it private. Prior to this refinancing news out of the blue, SCO's stock had been trading for 6 cents per share.
This deal should take SCO out of Chapter 11 bankruptcy. The company, faced with drooping sales of its Unix products, no hope in sight for its Linux lawsuits and an inability to get its mobile software sales going fast enough to make up for the first two factors, was in dire straits.
SCO tried to form a somewhat similar deal with York Capital in November 2007. That deal fell apart. Since then, SCO had appeared to be collapsing at a rapid rate.
In late November, the U.S. Bankruptcy Court in Delaware decided that SCO would have to face the music regarding what damages it owed Novell in the U.S. District Court in Salt Lake City before it would be able to protect its assets by going bankrupt. As the Utah court had already decided in August 2007 that Novell, not SCO, owned Unix's IP (intellectual property) rights, it seemed a foregone conclusion that when SCO went in front of the same court on April 29, 2008, the company would be found liable for amounts exceeding its remain assets. In short, SCO would finally go down for the count.
With this fresh influx of cash, SCO could conceivably weather an adverse decision from U.S. District Court Judge Dale Kimball, pay Novell the up to $37 million it may owe the Linux distributor and continue in business. It may, however, do so without its well-known CEO, Darl McBride.
According to sources close to SCO, McBride is leaving both the company and his position as CEO. When called about this, SCO had no immediate comment.
Jeff Hunsaker, president and chief operating officer of SCO Operations, rather than McBride, was the one to make the announcement that SNCP was buying out SCO. In a statement, Hunsaker said, "Not only will this deal position us to emerge from Chapter 11, but it also marks an exciting future for our business. 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."
According to the same release, Stephen Norris, managing partner for SNCP, claims that SNCP has a business plan for SCO "that will enable the company to see SCO's legal claims through to their full conclusion."
In his quote in the release, though, Norris only stated, "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. We expect to quickly develop these opportunities, and to stand behind SCO's existing base of customers and partners."
-- Steven J. Vaughan-Nichols
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