SCO Admits They Might Just Not Win - Maybe

inetsee writes "According to Groklaw, SCO has admitted in a 10K filing that if the court grants any or all of IBM's six motions for summary judgement, 'We can not guarantee whether our claims against IBM or Novell will be heard by a jury.' The site goes through a statement by statement run-down of SCO's filing, noting things like the absence of employee numbers (a piece of information they told investors they would disclose). Elsewhere in the document, it is revealed that SCO's stock is in danger of being delisted from NASDAQ, they may come under further litigation from an unrelated legal matter, and SCO is now claiming that OSes like HP-UX and Solaris are derivatives of code that they 'own'. Despite the dire pronouncements throughout the filing, if everything else runs according to plan their 10K indicates they could keep fighting the good fight for another 12 months."

Comments

SCO should skip Trial by Jury

[Anonymous Coward]

...and demand Trial by Combat.

And I'm not just saying that because I want Darl whacked by a sword.

Re:SCO should skip Trial by Jury

[Teresita]

And I'm not just saying that because I want Darl whacked by a sword.

IBM: What are you going to do, bleed on me?

SCO: I'm invincible!

IBM: You're a looney.

SCO: SCO always triumphs! Have at you! Come on, then. [whop]

[IBM chops SCO's last leg off]

SCO: Oh? All right, we'll call it a draw.

IBM: Come, Patsy.

SCO: Oh. Oh, I see. Running away, eh? You yellow bastards! Come back here and take what's coming to you. I'll bite your legs off!

Re:SCO should skip Trial by Jury

[shadowknot]

One small correction

SCO: Oh. Oh, I see. Running away, eh? You blue bastards! Come back here and take what's coming to you. I'll bite your legs off!

Stock price...

[eggoeater]

Isn't SCOs stock price/equity low enough to where IBM could just buy them outright?
Or at least 51%.

Re:Stock price...

[Spad]

Which is exactly what SCO want - to be bought up rather than to lose the case and end up bankrupt.

Not to mention the precedent it would set for other low-lifes to start legal action against IBM with the hope of being bought.

Re:Stock price...

[stanmann]

IBM could have bought them any time they wanted. They haven't because they're going to kill them, burn them, stomp the ashes, salt the earth, burn the salted earth, burn the salty earthy ashes, stomp that out, pour gasoline around, burn the remaining mess, and then piss on it to put it out.

Re:Stock price...

[eggoeater]

Yes, but unlike other low-lifes, SCO does have some
IP (NO I'm not talking about Linux) and other non-lawsuit related
revenue sources that could make it a good buy.

You make a good point though. IBM should wait until there's a judgment against SCO and the stock will plummet.

IBM could make arrangements with some of the larger private (non-employee)
stock holders to buy the stock at a higher price so the upper management doesn't
reap the rewards of a buy out. Once they get 51% they can dissolve the company
and absorb the assets.

Re:Stock price...

[ZorbaTHut]

Another issue is that, if IBM buys them, they probably end up having to deal with SCO's various madcap lawsuits. It's quite possible SCO is worth literally less than nothing right now, considering all the reverse lawsuits they're liable for.

Re:Stock price...

[KokorHekkus]

Short answer: No

First: The board of SCOX has adopted a poison pill plan which pretty much allows them to set any price regardless of what the company is worth on the stockmarket, should anyone be as daft as want to buy it. If you buy a company you also buy their liabilities. (And remember that some 45% of the shares is still held by insiders in the company) Darl McBride said in 2004:

In an apparent response to industry rumors that SCO may become the target of a hostile takeover bid, SCO's Board of Directors has implemented a "shareholders rights plan" designed to deter unsolicited takeover attempts, McBride said. "We believe that this will basically keep any outside offers or potential takeovers that are not in the best interest of the shareholders at bay," he said. The plan, which was adopted by the board on Aug. 10, gives SCO's board the right to determine the "fair value" of the company in the event of a takeover attempt, McBride said.

And that fits pretty well with the suspicion that their original plan was to force a buyout from IBM (Source http://www.infoworld.com/article/04/08/31/HNscocap s_1.html)

Second: as many others have pointed out - give in to extortion tacticts and they will just keep coming again and again and again.

Re:Stock price...

[KokorHekkus]

...IBM could make arrangements with some of the larger private (non-employee) stock holders to buy the stock at a higher price so the upper management doesn't reap the rewards of a buy out...

Besides the posion pill plan there are other problems: According Yahoo Finance 44.5% of the shares are held by insiders. I would be very very surprised if at least 6% of the shares is held by some non-insider that is very close and comfy with the insiders. Indirect indications of this is were the keeping up of the share price by somone who bought sizeable chunks (relative to the days trade) of stock near the end of the day.

But here is the real kicker... about riskfactors from their 10Q:

The right of our Board of Directors to authorize additional shares of preferred stock could adversely impact the rights of holders of our common stock. 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.

Now isn't that a nice (in the most cynical manner) way to have pretty much full control over what happens with your stock - 45% is held by insiders... who can choose to dilute the voting power of common stock holders. (Bold emphasis added by me)

Re:Stock price...

[MrNiceguy_KS]

Check out a great movie called "The Mouse That Roared" starring Peter Sellers (in several roles). It's a very funny movie based on this premise. I stumbled on it in my local library back in college.

A tiny European country with a failing economy declares war on the U.S. planning to lose and then collect millions in post-war aid. Unfortunately they win.

Nothing New

[Anonymous Coward]

ALL public companies say things like this in 10k filings. They ALWAYS state the possibility of failure. This is another "non-story".

HP-US?

[Lord Bitman]

Didn't know HP made a special patriotic release. Is it any better than that shithole HP-UX?

Even Miss Cleo saw this coming

[Merkwurdigeliebe]

SCO should have hired her. She could have told them their scam's chance was slim.

I thought that was standard for 10K...

[Jeff DeMaagd]

I thought 10K filings are supposed to have that type of information, on the forseeable risks. I don't care what sort of PR bravado a company has, a 10K filing is not the place to pretend you are guaranteed a win everything.

In short, nothing to see here, move along.

Re:I thought that was standard for 10K...

[tverbeek]

Mod parent up. These kinds of filings always contain statements of potential doom that you'll never find in any press release. If they're in a legal dispute, they have to say what the consequences will be if they lose... even if they sincerely and correctly expect to win. So it's not an admission that their case is weak, only of the fact that they are involved in litigation whose outcome is still pending.

Not that easy (even if they wanted to)

[overnight_failure]

SCO did some procedural jiggling to make sure they're not 'undervalued' during any procedure (i.e. the directors get more money than they're worth).

Take a look at this Groklaw article for a bit more detail.

Hooray Pamela Jones

[Darth Cider]

SCO deserves all the bad press it can get on Slashdot, but Groklaw has led the way. What a fantastic job they've done over there! Kudos, you fine folks.

Re:Hooray Pamela Jones

[gtall]

In a way, the parent is accurate. When SCO launched this expedition, they also launched it in the media. The media at the time was clearly piqued by the ramifications were SCO to succeed. IBM clammed up because they had a court case to fight. However, SCO used all the media hype to attempt to shake down other companies. Were it not for Groklaw poking public holes in SCO's stories, several companies likely would have paid up. Eventually, the court cases would have been lost by SCO and the gravy train would dry up. However, the precedent would not be good.

The beneficiary of this, and mostly likely the PuppetMaster after the initial benefits were realized, was Uncle Fester and Cousin It (a.k.a. Bill). They (and Sun) managed to funnel a few cool mil to SCO just to keep the game going longer. Groklaw ferreted that connection out in such a way that Uncle Fester and Cousin It probably won't touch SCO now with a ten foot pole.

In addition, Groklaw did some good work in ferreting out the details of the APA agreement and its tortured history into SCO hands. One could argue that Groklaw did more in freeing Linux from the stigma of "stolen" than IBM ever could do.

And Groklaw isn't going away any time soon. Uncle Fester and Cousin It will have Groklaw teasing out their malpractice with a fine tooth comb for a long, long time.

Gerry

Re:1000 times par value, still.

[Otter]

Par value is a non-zero value that the stock needs for regulatory reasons. It's as meaningless as, well, cautionary statements made in a 10K filing. It has nothing to do with how much profit any stockholder has made.

Re:1000 times par value, still.

[tessaiga]

Not sure who modded you insightful, but in today's regulated markets, par value for stocks is essentially a meaningless concept. Companies can basically set it at whatever value they like, and it has no relation to the IPO value or any other meaningful quantity. From the Motley Fool glossary:

Par value (stock)

An arbitrary dollar value that a company assigns to its shares. Par value has no economic significance. The legal significance of par value is, roughly, that if shares are issued below par value, the holders of those shares might be assessed the difference between par value and the issue price. Most stock certificates state that the shares are fully paid and nonassessable to indicate that holders are not on the hook for additional contributions because the shares were issued at a price greater than par value. Companies usually assign a very low par value to common stock.

Not to mention, most CxOs and other highly-placed insiders make their money from option grants, whose strike price the company's board can set to guarantee a profit for the recipients no matter where the current stock price is.

Darl's next employer...

[blcamp]

...will have him wearing a blue apron with the white letters and yellow smiley-face. He'll look wistfully upon the computers in the center aisle that are pre-loaded with "his" operating system.

And he'll mutter to himself: "ahh, what might have been"...

Re:What would become of UnixWare and OpenServer?

[peragrin]

Since 95% of the money MSFT and Sun paid SCO goes back to Novell and Since SCO itself list Unixware and Open Server at values of less than 5 million dollars. Novell will end up with both product lines.

Nope the only thing left will be the fraud trials for Ralph Yarro and Darl Mcbride. Since it is obvious to all that this has been a buyout scam from the beginning. Darl is on record as saying that unless they launched the lawsuits(and got financing from MSFT, Sun and Baystar) SCO would have been bankrupt by now.

From 09 June *2003*

[NZheretic]

Read this posting from back in 09 June 2003 What evidence of origin,ownership,copyright + GPL - Caldera/The SCO Group were F**ked from the beginning.

In other words ( from Wednesday, March 10, 2004 A plea for relief from Microsoft's escalating anti-competitive tactics. ):

The SCO Group has entered into a series of essentially inherently flawed lawsuits and fraudulent license claims against users of the Linux operating system. Since 1994, Caldera International and the Santa Cruz Operation have been accepting, profiting from and distributing software developed by hundreds of independent developers under the terms of the GPL and LGPL license. The SCO Group has failed to put forward any sustainable legal theory why it should not abide by the terms of the GPL license. Detailed investigation into other facts and evidence which regularly conflict with the SCO Group's various legal claims, filing, press and public statements, raises serous questions which can no longer be explained away by a lack of competence in either the SCO Group's CEOs or the SCO Group's legal representation.

Re:How stupid are they, really?

[ebuck]

Technically both HP-UX and Solaris are derivatives of code that SCO somewhat controls. The thing to remember is that they are LICENSED derivatives, which have paid thier royalties and have permission to call themselves UNIXes.

They're probably enhanced versions of System V, but they might have done even better than that. System V has been around the block a few times, and there's a lot of room for enhancement. That means that assuming SCO has some claim of ownership of the System V code, all other UNIXes are derivates. Unfortunately, all other UNIXes are licensed derivatives, and those agreements usually were written to be non-revokable.

Remember when SCO declared that they had revoked IBM's license for AIX? Well, IBM pulled the contract and it stated clearly "non-revokable". SCO is going to die, but it will continue to be a long slow death.

Scox has already won

[walterbyrd]

When Darl was hired as CEO, just before the scam began, about four years ago. Scox's market cap dropped below $6M. Scox was on the brink of delisting and bankruptcy. Now scox's market cap is over $20M.

Kevin McBrid pulled in $885K in the last two years. Darl probably made about $2M since the scam began. Not bad for small time scammers. Scox's law firm, BSF, has made over $30M. And the company that financed the entire scam, MSFT, is getting five years of top quality FUD for a meager $50M.

Scox never expected a victory in court, scox expected either a quick settlement, or scox would just loot as much msft FUD money as possible.

Scox was just given more delay - yet another scox victory.

Re:Let's hope they last long enough...

[rkhalloran]

I agree I'd prefer they not go bankrupt too soon, but I expect that IBM's motions for summary judgment, Novell's claims the copyrights never went to SCOX, Red Hat's Lanham Act claims (false advertising that Linux infringed UNIX) will torpedo them well before anything gets to a jury.

THEN they can go bankrupt, and we can all watch the principal parties doin' the perp walk.

SCOX DELENDA EST!!

Re:How stupid are they, really?

[StormReaver]

"Technically both HP-UX and Solaris are derivatives of code that SCO somewhat controls."

Both IBM and SUN bought out their royalty obligations years ago, and neither owes royalties to anyone. SCO has no control over either (even if we accept SCO's fantasy-land theory that it bought UNIX).

More like this

[splatterboy]

SCO Lawyer: Our motion to compel was denied by the judge
Darl McBride: Denied? Inconceivable!
SCO Lawyer: Our sealed motion for reconsideration, which tossed out 187 of SCO's items of allegedly misused materials by IBM, was also denied by the judge
Darl McBride: Denied? Inconceivable!
SCO Lawyer: Most recently, our motion for Motion for Relief for IBM's Spoliation of Evidence was denied by the judge
Darl McBride: Denied? Inconceivable!

IBM Lawyer: You keep using that word, I do not think it means what you think it means...

Re:1000 times par value, still.

[sconeu]

Not quite. SCOX has closed below $1.00 a few times. My understanding (IANASB -- I am not a stock broker) is that you have to be below $1.00 for an extended period of time (30 days?) before you're in serious danger of delisting.