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SCO Preps Appeals Against Novell and IBM

Posted by samzenpus on Wed Mar 05, 2008 11:05 PM
from the harder-to-kill-that-the-tarrasque dept.
Linux Business Government IBM Novell The Courts News
An anonymous reader writes "It looks like SCO will be emerging from the almost dead soon, with new owners and $100 million on board. SNCP is adjusting the business strategy, according to this report on TG Daily, SCO is saying goodbye to CEO Darl McBride and is also preparing to appeal the summary judgments in the cases against Novell and IBM. If you have thought the chapter was closed, think again. Those $100 million can go a long way (even if SCO has to pay 17% interest on it)."
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  • Now that's a deal. (Score:5, Insightful)

    by Black Parrot (19622) on Wednesday March 05 2008, @11:08PM (#22659452)
    Use your bail-out money to dig the hole deeper.
      • Exactly. How much longer can this go on?
        We've determined that:
        1. They never ponied up the code that supposedly infringed, strongly suggesting that it doesn't exist.
        2. They didn't even have the right to the copyrights of the Unix code they claimed Linux infringed upon.
        3. They (probably fraudulently) collected license money for "protection" against the non-existent claims in #1 on the inelligible code in #2.
        4. They did it all while making themselves rich and the stockholders poor through pump-and-dump.
        Shouldn't people like this be in jail?

        • You guys completely miss the point (Score:4, Interesting)

          by EmbeddedJanitor (597831) on Thursday March 06 2008, @01:35PM (#22665822)
          Kevin McBride, Darl's brother, is one of SCO's lawyer. Lots of legal work means more money gets shunted out of SCO into the McBride family.

          If they've got their mitts on some more money then more legal work is a good way to pump some of that cash into a safe place. No point in them leaving cash in a sinking ship.

          • Re:Now that's a deal. (Score:4, Funny)

            by Stooshie (993666) on Thursday March 06 2008, @07:52AM (#22661810) Journal

            ... It is a wonderful mockery ...

            I know. There's a musical coming out on Broadway soon, I'm sure. I think it's called: "S-C-O, Way to Go!" with such hits as "It's a wonderful mockery", "It's my rights and I'll do what I what with them", "Back in the Old Routine", "Look what happened to Darl" and the big hit number "Hello Lolly!"

          • Re:Now that's a deal. (Score:5, Insightful)

            by Anonymous Coward on Thursday March 06 2008, @08:34AM (#22662096)
            Not exactly. Anyone who wins a judgment vs. SCO will become an unsecured creditor. They don't "own" SCO if they win. The court can award money damages, it can't force SCO stockholders to sign over their shares or force SCO to print new ones. Besides, Novell is unlikely to accept SCO shares as payment (given the lack of underlying value).

            I think the goal here is to get SNCP onboard as a creditor ahead of any judgements against SCO. That way, they can continue to run up the expenses and drag out the court actions. When the day of reckoning is finally here, SNCP will be a huge creditor. They will take quite a loss, even after chewing up what remains of SCO. I suspect SNCP will get reimbursed via the PIPE fairy or whoever was underwriting the deal with Baystar.

            As a private company, SCO will be exempt from all kinds of shareholder disclosures, SEC regulations, etc. Very useful in pursuit of this strategy.

            There is one factor that the SCO folks may not have considered: Their strategy sets a scary precedent. If it works, we might see the "scorched earth" defense become commonplace. We might even see individuals doing the same type of thing when faced with a liability suit. This would make a mockery of the judicial system. SCO has to lose, and lose big. Their financial co-conspirators need to be exposed and clobbered. Unless they get a royal smackdown from the court, this behavior will be validated and probably repeated by others in the future.

            • Except For One Thing (Score:5, Insightful)

              by maz2331 (1104901) on Friday March 07 2008, @01:04PM (#22677788)
              The court ruled that SCO *converted* money that was actually Novell's in the licensing racket, so SCO never had actual ownership of that cash. That is way different from normal debt, and can't be discharged under bankruptcy. The only reason this liability isn't "on the books" yet is that the original court hasn't figured out how much it is, but it's safe to assume that it will be "a lot".

              As a bonus, the court that will be deciding how much it is will be the same one that SCO told no trust fund was required because bankruptcy wasn't imminent just a few weeks before they filed for bankruptcy. They are almost certainly well and truly fucked here, and "spin" isn't going to change that. Their whole strategy seems to be to provoke the judge to anger so they have an issue for appeal, but Kimball is a pretty cool customer who will make sure that his ruling is air-tight.

              The Utah court's summary judgment held that SCO does *not* own the copyrights to the code they are licensing. SCO built their entire case around a theory of "but... we paid a lot of money for this business, and of course it transferred the copyrights to us! Never mind what the actual contracts said." Too bad for them that the court rejected that argument totally.

              And, this article presumes that the BK court will approve the deal, and do so over the objections of the major creditors. The judge may well not approve the deal as written, as there is no real guarantee of the additional $95M being actually available, and further since the $95M is a line of credit at a 17% interest rate it could magically evaporate at any time.

              The deal really doesn't provide any security for the creditors at all, nor does it put the post-bankruptcy SCO in a financial position where it is unlikely to be back in bankruptcy in the near future. Indeed, it puts the company squarely in debt for even more than it faces to begin with due to the interest. The creditors names change, but the debt remains and really grows exponentially.

              The only way I can see the court approving this is if the entire $100M were a straight-up equity purchase which was a cash infusion sufficient to pay off and retire all the debt. Just moving the chairs around on the deck isn't going to pass muster here.

              As for the appelate courts, SCO's behavior prior to summary judgement will be a huge factor. They dragged the case out, refused to comply with discovery orders, and changed their arguments constantly.

  • Dear Novel and IBM (Score:5, Funny)

    by Strange Ranger (454494) on Wednesday March 05 2008, @11:12PM (#22659482)
    It looks like SCO will be emerging from the almost dead soon, with new owners and ... is also preparing to appeal the summary judgments in the cases against Novell and IBM.

    This time please use holy water and lawyers made of silver.

  • Doesn't the sale have to be approved first? (Score:5, Informative)

    by MintMMs (909563) on Wednesday March 05 2008, @11:13PM (#22659492)
    Doesn't the bankruptcy trustee have to approve the sale first? The article sounds like this is already a done deal.. Dang, I need to start reading Groklaw again.

    • Another journalist who isn't keeping up. (Score:5, Informative)

      by Jaywalk (94910) on Thursday March 06 2008, @12:11PM (#22664586) Homepage
      It's always important to notice when an article starts off with "The SCO Group plans ..." and then doesn't seek out any verification or outside opinions. It's probably another lazy journalism piece where the author simply rewords a press release and calls it "news". All this article does is lay out a motion with no investigation into the context.

      For example, you would think he would have noticed that Novell has already objected [groklaw.net] to the reorg because of the sketchy details. Like, does SNCP even have access to that kind of money? There is this article [itjungle.com] that says Norris might have Middle East connections, but no explanations of why those connections would want in on the SCO case. Or how much of the bill they'd be willing to cough up. The schedule's a bit iffy too. Novell points out that SCO's hanging on to the "definitive documents" on the reorg and isn't planning on releasing them until the day that objections to the reorg are due. Read carefully and you'll see that objections are due by March 26th at 4:00pm, while the documents are to be released on March 26th, but with no time stated. Any bets on SCO planning on providing those at 4:01pm?

      Keep in mind that SCO has already proposed and scrapped [groklaw.net] a bailout deal. In that one, they were playing a shell game where all the company's assets (and execs) went one way, while all the company's liabilities went the other. Needless to say, the courts weren't going to let that happen.

      The bottom line is that this is SCO, so you already know it's a scam. It's just a matter of waiting and watching to determine what kind of scam they're trying to run this time.

  • This is like a bad Ed Wood movie. "Plan 10 from SCO"

  • Bad summary (Score:5, Informative)

    by schon (31600) on Wednesday March 05 2008, @11:17PM (#22659530) Homepage
    They won't be emerging from the almost dead, and they won't have $100M, and it's not 17%

    They're still almost dead - this deal doesn't change anything about the fact that they owe a ton of cash to Novell, and will soon owe more to IBM.

    The $100M is really $5M, plus a LOAN of *up to* $100M.

    And the loan's interest rate is 17% plus prime (so closer to 21%.)

    This is like you claiming that MBNA invested $50,000 in you when you signed up for a new credit card.

  • Inaccurate subject (Score:5, Informative)

    by EssenceLumin (755374) on Wednesday March 05 2008, @11:19PM (#22659540)
    First of all this is at least a few weeks old. Check Groklaw. Second they are not giving SCO $100 mil outright. They are giving $5 mil with an option to loan another $95 mil over 5 years.

    • Re:Inaccurate subject (Score:5, Informative)

      by tomhudson (43916) <hudsonNO@SPAMvideotron.ca> on Wednesday March 05 2008, @11:59PM (#22659800) Journal

      First of all this is at least a few weeks old. Check Groklaw. Second they are not giving SCO $100 mil outright. They are giving $5 mil with an option to loan another $95 mil over 5 years.

      ... and they're even backtracking on the whole deal now, saying it depends on due diligence, etc ...

      It's YASPS - "Yet Another Stock Pump Scheme". Darl, contrary to his public protests, is VERY happy to be getting out/cashing out.

  • poetic justice (Score:5, Insightful)

    by peektwice (726616) on Wednesday March 05 2008, @11:20PM (#22659550)
    In a way, it's kind of poetic that these trolls are going to get raped by a loan shark (SNCP) at 17% interest. 95 million times 17% times 5 years is 80.75 million dollars, not compounded. That's an ass raping if I ever heard of it. Plus, they're going to have to pay 37 million to Novell, if they lose their appeal. It feels like something much deeper and more sinister is going on here, and it stinks. I just can't put my finger on it yet.

    • Re:poetic justice (Score:5, Interesting)

      by clem.dickey (102292) on Thursday March 06 2008, @12:12AM (#22659878)

      Don't forget that the loan shark gets a controlling interest in the company. What are the chances the shark (acting as SCO) is going to ask itself (SNCP) for millions of dollars to pay a judgment to Novell? If/when that happens, the shark needs to ask itself whether its worth the risk, even at 21%. It only makes sense if SNCP really believes that SCO can get the Novell judgment reversed on appeal and win some money from IBM. That could be a big, risky bet.

      The deal appears to be that SNCP is committed to loaning SCO $95 million, but only once. If the SNCP loans SCO $95 million on Monday and SCO repays the loan on Tuesday, it appears that the commitment has been fulfilled.

    • Re:poetic justice (Score:5, Interesting)

      by dbIII (701233) on Thursday March 06 2008, @12:19AM (#22659918)
      I think the deeper and sinister bit is that Darl created a corporate train wreck and funneled a lot of the legal fees directly to his brother. IMHO that was the plan all along - IBM was the wall to audaciously run into and linux was the excuse, and whatever cash fell off SCO was the goal. I think it's worth paying attention to where he goes next and what happens there. To some people he would look like the underdog that got the share price up, took on IBM and he would have beat them too if it wasn't for those darn educated communist geeks and their penguin. He'll have an opportunity for a bigger scam next time.

  • SCO doesn't have anything yet (Score:5, Insightful)

    by HangingChad (677530) on Wednesday March 05 2008, @11:35PM (#22659628) Homepage

    They don't have squat until the BK court approves it. Even then they only get 5 million and 95 million in flash cash. If the trustee tells them to put the money in escrow against potential judgments from IBM and Novell, that will flush this deal. This is all show but I haven't figured out who the audience is supposed to be. The BK court isn't going to be impressed.

    I'm not sure what they're going to appeal. SCO dug themselves a really deep hole, an appeal is a long shot.

    No one with a brain would loan SCO a nickel. It would take a cash cow like Microsoft to convince anyone to get in bed with SCO. Maybe that answers who the audience is supposed to be. Like there are serious players who think SCO's IP claims have merit. Ooooo, scary. If that's the case this is to business strategy what the Zune is to Apple.

  • Darl could learn from the Monkey Dancer (Score:3, Insightful)

    by rice_burners_suck (243660) on Wednesday March 05 2008, @11:42PM (#22659680)

    Why in the world would someone take $100 Million perfectly good dollars and just throw them into this worthless money pit? Incidentally, if you write SCO as $C0, and then move the C to the front, you've got, "See? $0." And it seems to me that's what everyone ends up with who touches this thing with a 100 million foot pole! Who in the heck wants SCO's OS anymore? You know what? Even if they do want it, does anybody really want software from a company that might disappear at any moment due to all this litigation drying up it's well of money? Where will they get support?

    Especially, why would they do this when Linux and the *BSDs are so far superior at this point due to the efforts of millions and the incredible amount of support, mindshare, and money behind them from individuals, small businesses, large businesses, and even governments. Not to mention that all modern Apple Macs are running a UNIX operating system that can accomplish all, or at least nearly all, of the functions that can be accomplished by any other UNIX or UNIX-like system out there. Not to mention further that all of the aforementioned OSes are superior in an uncountable number of ways to SCO's OS. Not to mention that the entire code to Linux and the *BSDs is available for your perusal or participation, as with a tremendous variety of programs that are run on these systems, from Apache to something that starts with a Z. Why would anybody pay good money to SCO for it's stuff when SCO is acting like the bully at the playground and when all of this is available for free, both libre and if you want to download and build stuff yourself, gratis...

    In my opinion, SCO is no longer a software company, but a litigation company.

  • Penny Arcade (Score:5, Funny)

    by Bob54321 (911744) on Wednesday March 05 2008, @11:48PM (#22659728)
    I think this [penny-arcade.com] comic applies here too...

  • money doesn't cure everything (Score:3, Interesting)

    by belmolis (702863) <billposer&alum,mit,edu> on Wednesday March 05 2008, @11:53PM (#22659754) Homepage

    Even a large infusion of cash is unlikely to do SCO any good. They have no income to speak of and no product likely to generate any. Their lawsuits have no chance of succeeding given the ruling that they never acquired the Unix copyrights from Novell. Even in the extremely unlikely event that this is overturned on appeal, they still have to prove infringement of their copyrights, which, with discovery complete, they have still been unable to do, and they have to overcome the problem that they themselves distributed Linux under the GPL, which is a huge problem for them. Finally, no matter what happens, they are going to have to pay millions to Novell since they failed to pass on to Novell the income from their franchise to sell Novell's Unix property, for which they (SCO) were merely to receive a 5% fee. Money will pay the lawyers a little bit longer, but it isn't likely the lawyers can postpone the end very much.

  • Put SCO down (Score:5, Interesting)

    by TopSpin (753) * on Thursday March 06 2008, @12:04AM (#22659836) Journal
    SCO is a penny stock now. Somewhere between $0.17 and $0.20 [pinksheets.com] a share. Market cap is $4.3 million.

    How many of you would contribute $50 to take a controlling interest in this festering pimple of an "IP" company? If the next ~80,000 /. regulars that read this were willing the company could be taken over and put down, permanently.

    Create a non-profit (name it SLASHX, perhaps) or some other legal entity, raise funds and buy shares. The percent of ownership remaining appears on a sidebar with a link to some collection agency. Make Stallman or some other credible figure chairman and just keep buying shares till "we" hold 51%.

    I'm no financial guru. Perhaps the idea is naive. However, you can damn well bet I'd contribute.

    • Re:Put SCO down (Score:5, Interesting)

      by greg1104 (461138) <gsmith@gregsmith.com> on Thursday March 06 2008, @01:12AM (#22660198) Homepage
      IBM could have bought them out at a couple of points cheap--when they started this lawsuit they weren't trading for that much more than they are now. They didn't because it's more important to make an example of these idiots, and therefore to the larger group of potential future intellectual property trolls, as to what happens when you mess with companies because you think using Linux makes them vulnerable. No one should even consider spending a penny to buy them out, they need to die the hard way to make that lesson stick.

      Also, it's quite possible Novell will own them anyway before this has finished playing out, because of the $37M SCO owes them. This shell game with loans won't necessarily change that. While they're posturing hard now, I have my doubts as to whether these "angels" will really cough up all that money when the courts force the company to do that.

    • Re:Put SCO down (Score:5, Informative)

      by neurojab (15737) on Thursday March 06 2008, @02:02AM (#22660442)
      How many of you would contribute $50 to take a controlling interest in this festering pimple of an "IP" company? If the next ~80,000 /. regulars that read this were willing the company could be taken over and put down, permanently.

      It's too late for that. SCO is in bankruptcy court, in chapter 11 proceedings. This means that the current stockholders have effectively no say in what goes on at this point. It's up to the SCO to come up with a reorganization plan that will allow it to continue to operate. Generally a reorganization plan includes cancelling any and all common stock, as does theirs "On the Effective Date, the existing common stock and common stock equivalents of SCO Group shall be cancelled and extinguished." Anyone buying the stock now is hoping for a miracle and that SCO will somehow continue to operate without completing chapter 11 reorganization.

      In summary, doing this would neither give you control of the company now, nor when they exit chapter 11. ... not a financial expert either, but did own WCOM stock :)

    • Re:Put SCO down (Score:4, Interesting)

      by KokorHekkus (986906) on Thursday March 06 2008, @06:39AM (#22661496)
      Guess I'll answer this question again: it can't be done. The value of the common stock has nothing to do with how much it will cost to take over the company since they have had a so called "poison pill"-plan in place for years exactly for that reason. It's all in the hands of the board of directors. If you take a look at their 10-K you'll see the following under "Risk Factors"):

      We have adopted a stockholder rights plan. The power given to the Board of Directors by the stockholder rights plan may make it more difficult for a change of control of our company to occur or for our company to be acquired if the acquisition is opposed by our Board of Directors.
      And the following from the 10-K clearly illustrates exactly how little control the common stock owners have over the company:

      Our Board of Directors currently has the right, with respect to the 5,000,000 shares of our preferred stock, to authorize the issuance of one or more additional series of our preferred stock with such voting, dividend and other rights as our directors determine. The Board of Directors can designate new series of preferred stock without the approval of the holders of our common stock. The rights of holders of our common stock may be adversely affected by the rights of any holders of additional shares of preferred stock that may be issued in the future, including without limitation, further dilution of the equity ownership percentage of our holders of common stock and their voting power if we issue preferred stock with voting rights. Additionally, the issuance of preferred stock could make it more difficult for a third party to acquire a majority of our outstanding voting stock.
      Bold is my added emphasis.
      So as soon as anyone acquires anywhere close to enough stock to make a voting difference the board of directors will just issue more voting stock which they will control. Source:http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0000891020-07-000020&Type=HTML [edgar-online.com]

  • Won't stick (Score:5, Interesting)

    by Frantactical Fruke (226841) <renekita@@@dlc...fi> on Thursday March 06 2008, @12:42AM (#22660048) Homepage
    I had the impression that in both cases the judges have been extremely scrupulous in framing their judgments to rule out successful appeals. It's not as if SCO had any facts to present for consideration, let alone new ones. Appeals to clearly shut cases get dismissed, right?

  • Will they even get an appeal (Score:5, Informative)

    by dmgxmichael (1219692) on Thursday March 06 2008, @01:00AM (#22660154) Homepage

    I don't care how slick the lawyer is, SCO had a summary judgment against them. Provided the judge in the case dotted all the i's and crossed all the t's those things are damn near impossible to successfully appeal. I'd put the odds against successful appeal at 20 to 1. More likely than not the appeals court will simply say, 'No' and that will be the final whimper of SCO.

  • The only thing SCO needs to prep (Score:3, Funny)

    by microbee (682094) on Thursday March 06 2008, @01:05AM (#22660180)
    is a death will.

  • who cares yet? this is not factual. (Score:5, Informative)

    by poetmatt (793785) on Thursday March 06 2008, @01:31AM (#22660310)
    Just a FYI, this deal has not been approved. So all this "SCO is going to be saved" stuff, has no factual basis whatsoever. Bankruptcy court would have to approve of it, and that is not likely at all. So the slashdot article here = incorrect.

    • Re:PJ must be relieved... (Score:5, Informative)

      by belmolis (702863) <billposer&alum,mit,edu> on Wednesday March 05 2008, @11:44PM (#22659694) Homepage

      Actually, Groklaw [groklaw.com] has begun to deal with other cases of dubious IP claims and attacks on free software, open standards, and so forth, so it will still have a reason for existence once SCO is kaput. The current top article, for example, is about the ISO BRM on OOXML.

      • Re:PJ must be relieved... (Score:5, Interesting)

        by TropicalCoder (898500) on Thursday March 06 2008, @05:56AM (#22661338) Homepage Journal

        The current top article, for example, is about the ISO BRM on OOXML.

        I am really amazed that Slashdot hasn't picked up this story yet. I mean, I just can't believe it! This is the story of the week. This is a huge thing, as those who have been following it are well aware. The process at the BRM was so flawed as to bring into serious question the integrity of the ISO/IEC JTC-1. I won't add to the tens of thousands of lines of text that have been written about it here, in fear of being ruled off-topic. I only want to question why this hasn't been aired on Slashdot.

        Beginning on Friday, I was scanning the news anxiously to see how the BRM went, and shortly the first reports began to emerge. By Monday, the first report from an actual BRM participant [robweir.com] came out. By Tuesday, the available information was growing exponentially. I was following all this on Groklaw, and kept flipping back and forth from Groklaw to Slashdot to see if they had picked it up yet. When a second blog by Andy Updegrove [consortiuminfo.org] became a resource of links to every report by BRM participants, I could wait no longer. I wanted to see how this story was viewed by my fellow Slashdotters, naturally. I was so concerned that this still hadn't reached Slashdot that I reluctantly submitted the story myself. Then I started backtracking on the Firehose and discovered that there had already been 6 submissions at that point, and that was on Monday. I'll bet there have been dozens by now, besides thousands of people people clicking on those "Submit to Slashdot buttons all over the place". I just can't imagine why the editors haven't put this important story in front of Slashdot readers yet.

        Please forgive me for interrupting the current story. I just had to get this off my chest.

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