Insolvent SCO scraps its reorganization plan

SCO Group Inc., the Utah County-based bankrupt software developer that claims to own copyrights to the Unix operating system, has scrapped a $100 million reorganization plan after its financial sponsor asked for a new deal.

Instead of buying $5 million in new SCO stock and loaning the company $95 million, Stephen Norris & Co. Capital Partners LP is negotiating a purchase of the assets, SCO attorney Arthur Spector said at a court hearing Wednesday in Wilmington, Del.

"We don't have a new deal," Spector told U.S. Bankruptcy Judge Kevin Gross during a status conference on SCO's reorganization plan. "But when we get the deal that we think we are going to get, it's going to be better."

SCO, based in Lindon, is in a legal battle over its Unix copyright claims with Novell Inc. and International Business Machines Corp. SCO filed for bankruptcy after losing a key court ruling last year, temporarily suspending the copyright case.

A U.S. judge in Utah ruled in August that Novell, not SCO, owned the copyrights to Unix. In November, Gross gave Novell permission to pursue royalty claims against SCO.

SCO claims IBM, the world's biggest computer-services company, based in Armonk, N.Y., improperly incorporated Unix code into Linux, a free operating system that competes with Microsoft Corp.'s Windows. SCO has tried to collect billions of dollars in royalties from Linux users, including more than $5 billion from IBM, angering some computer programmers.

"We want to see SCO get their comeuppance," said Richard Davidson, a 65-year-old retired civil engineer who drove 125 miles from Reston, Va., for Wednesday's court hearing.

Novell, based in Waltham, Mass., is the second- largest seller of Linux operating software in the United States, behind Red Hat Inc. The companies sell business versions of Linux, as well as customer-support services.

The U.S. Trustee monitoring SCO's case for the Justice Department may demand that the company be taken over by an independent fiduciary if the talks with Stephen Norris fail to deliver a reorganization plan. This is the company's third attempt to negotiate a way out of bankruptcy, Joseph McMahon Jr., an attorney with the U.S. Trustee's office, told Gross.

"I don't think this case can take a fourth chapter," McMahon said.

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