Few surprised at SCO plight

As word continues to spread about the SCO Group Inc.'s bankruptcy filing, the reaction among industry analysts is largely the same: Not too many people are surprised.

"I thought eventually things would catch up to them," said George Weiss, an analyst for the information technology research company Gartner Inc.

"It was a strategic mistake to put so much investment in the IBM lawsuit and attack the Linux community," Weiss said.

SCO sued IBM in 2003 for more than $5 billion for copyright infringement and breach of contract. The Lindon-based company claimed IBM violated an agreement by putting Unix source code into the code for Linux, a free operating system that competes with Microsoft Corp.'s Windows.

The following year, SCO sued Novell for slander of title after Novell publicly disputed ownership of the Unix copyrights. Trial in that case was scheduled to begin Monday in Utah's federal court, but as a result of Friday's filing in the U.S. Bankruptcy Court in Delaware, all Utah matters have been put on hold indefinitely.

According to court documents, the injunction "will remain in effect until the bankruptcy case is dismissed or closed."

Weiss has followed the case since the beginning and said such lengthy litigation against formidable opponents like IBM and Novell were apparently too much for the local company.

"I fully expected that IBM would continue to keep the case out there in abeyance, so to speak, for as long as possible," Weiss said. "They very well knew that SCO had limited resources."

He added: "It is now past time where SCO can really regain any significant returns from the action they waged."

Rob Enderle, an industry analyst in San Jose, Calif., made similar comments late last week.

"They were going to owe Novell a ton of money that they probably didn't have," Enderle told the Associated Press on Friday. "They have been taking a major hit from legal fees and were burning through cash at a high rate. I don't think this is a big surprise."

SCO recently suffered a major setback in its case against Novell when a Utah federal judge ruled that Novell — and not SCO — owns the copyrights covering the Unix computer operating system. In an order entered the same day as the bankruptcy filing, U.S. District Judge Dale Kimball refused to reconsider that Aug. 10 decision.

In a Friday news release about the bankruptcy filing, SCO said it plans to maintain normal business operations throughout the proceedings. Customers can "continue to rely on SCO products, support and services" during Chapter 11 reorganization, SCO president and CEO Darl McBride said in the statement.

However, analysts have recently noted that "normal business operations" have not been terribly strong at SCO in recent years.

"It looked to me like it was constantly backpedaling and very unstable in its (business) strategy," Weiss said.

"Unix is a declining market, (and) for SCO it's been fairly rapidly declining," he added, noting that SCO has been in a "tremendous race" to build new products unrelated to the issues in its ongoing legal battle.

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E-mail: awelling@desnews.com