SCO Blames Linux For Bankruptcy Filing

Stony Stevenson writes "SCO Group CEO Darl McBride is now claiming that competition from Linux was behind the company's filing of Chapter 11 bankruptcy. 'In a court filing in support of SCO's bankruptcy petition, McBride noted that SCO's sales of Unix-based products "have been declining over the past several years." The slump, McBride said, "has been primarily attributable to significant competition from alternative operating systems, including Linux." McBride listed IBM, Red Hat, Microsoft, and Sun Microsystems as distributors of Linux or other software that is "aggressively taking market share away from Unix.""

Comments

Caldera to SCO: Backing the wrong source

[Kelson]

Okay, I'll grant that competition from Linux distributors probably has taken business away from their Unix offerings. (Not that there's a problem with that, it's just the way markets work.) Of course, I'm sure their "we'll sue our customers!" antics didn't help, as the distributors behind such Unix varieties as Solaris, AIX, HP-UX etc. don't seem to be in quite such dire straits.

But let's not forget that a few years back, this SCO was known as Caldera. They were a Linux distributor. They were a founding partner in UnitedLinux. Then they bought Unix -- well, they bought something -- and changed their name to sound like the old SCO (Santa Cruz Operation), and refocused their business on Unix and lawsuits.

Anyone want to bet that if they'd stuck with Caldera Linux as their primary business, they'd be doing a lot better today?

To pull out an old analogy, it's like they started out as an automobile company, and then decided to switch to the buggy-whip business -- and now they're blaming the automobile companies for their business failures.

Re:Caldera to SCO: Backing the wrong source

[Anonymous Coward]

I don't know that if they'd stuck with the Caldera name and business model that they would have succeeded. After all, how much space is there really for commercial support in the Linux space. Maybe they'd have succeeded, maybe not - but their legal antics and operatic press releases made them look like maniacs. And that is entirely their own fault.

Translation for those who don't know...

[Anonymous Coward]

corporate cop-out speak:

McBride listed IBM, Red Hat, Microsoft, and Sun Microsystems as distributors of Linux or other software that is "aggressively taking market share away from Unix."


We would like to blame other entities for our inability to make a quality product that can compete in a competative marketplace. Simple put they are responsible for our incompetance.

Other choice quotes

[Just Some Guy]

My favorites:

As a result of both the Court's August 10, 2007 ruling and our entry into Chapter 11, there is substantial doubt about our ability to continue as a going concern.

and:

Revenue from the UNIX business decreased by $2,704,000, or 37%, for the three months ended July 31, 2007 compared to the three months ended July 31, 2006 and revenue from the UNIX business decreased by $5,103,000, or 23%, for the nine months ended July 31, 2007 compared to the nine months ended July 31, 2006.

and:

Revenue from our SCOsource business decreased from $31,000 for the three months ended July 31, 2006 to $0 for the three months ended July 31, 2007. Revenue also decreased from $95,000 for the nine months ended July 31, 2006 to $23,000 for the nine months ended July 31, 2007.

Ouch. To their credit (heh, I are teh funny), they managed to only lose $4.6M during that 9-month period, down from $12.9M a year earlier. Unfortunately, it looks like they're also out of things to cut.

Re:Tough noogies

[mhall119]

And "we got outcompeted by X, Y and Z" is a pretty damn common reason. Sure sounds better than "We abandoned product X to sell product Y. Then other companies proved that selling product X was more profitable than selling product Y. We then spent a whole bunch of money suing those companies for selling product X and our own customers for using product X without paying us for our product Y, only to be told we didn't actually own product Y, and owed ass-loads of money to Company Z."

Stop complaining!

[mce]

Indeed. And what's wrong with that? They filed for chapter 11, so now they naturally have to explain why. Competition that they cannot beat is the reason. The real one. What's wrong with little Darl saying that, other than that it probably is the first accurate business related statement coming out of his mouth in years and that he should have said it a long time ago?

I truely don't understand why you guys are screaming so much about this one. What McBride said is true amd he has to say it: Linux is the thing that ruined their business. It was doing that back in 2003 already. The fact that SCO used the dirty method they did to try to escape from the inevitable, does not change the basic facts. Get over it. You should all be happy, for $YOUR_DEITY_HERE's sake! So stop wasting time on such blahblah and get back to work, making Linux even better. SCO is history.

Re:Oh that Darl McBride!

[Billosaur]

Does anyone worry his next job will be working for their company?

Citing his vast experience, General Motors has announced Darl McBride is being named CEO, in hopes of ramping up flagging sales of GM products by suing Honda and Ford.

Re:Tough noogies

[gowen]

Oh, I agree. Bankruptcy filings get written by the soon-to-be-outgoing board. Unsuprisingly, they rarely say "This company folded because the outgoing board is almost completely incompetent and abandoned its core business in order to give all the company's assets to its lawyers."

Funny, that.

SCO is solvent

[darkonc]

SCO is solvent -- unless you include the money that they {claim that they don't,} owe to Novell. . . but even if they end up owing half of the $24M that Novell claims they owe, that would be more than enough to put them into the red.

Thus, . . . even if you accept that competition from Linux has hurt them, what really cooked their goose was suing Novell and, thus, forcing Novell to counter-sue. (Once SCO sued Novell, if Novell hadn't countered with the demand for payment of owed royalties, they might have been permanently barred from suing SCO for that $20M at a later date).

Of course, in their bankruptcy filings, SCO doesn't acknowledge that they owe Novell anything ... presumably under the premise that nothing is owing until the judge declares so in the trial (that is now being held in limbo by the Chapter 11 request). The problem that SCO may have, however, is that -- until, and unless Novell's royalties are declared (or acknowledged) owing, SCO is actually solvent, which means that the bankruptcy court may actually deny their request to go into chapter 11.

On the other hand, admitting that they owe all of this money to SCO would defeat the probable purpose of the filing -- which appears to be keeping Novell off of the list of top creditors. (I'm not going to link to groklaw, here, because their servers are SOOO snowed under by all this sudden attention -- and that just after they upgraded!).

The reason why SCO probably fears Novell being on their list of top creditors is that Novell would then lead a board of creditors which would have an incredibly wide-ranging ability to look into the recent actions of SCO from the inside -- and given how much SCO has been dancing to prevent certain disclosures in court, I expect that they'll be very unhappy to see Novell lawyers walking into the office to pull that very same information out of SCO's files in person.
And then there's the question of how much 'encouragement' Microsoft provided for the lawsuit against Linux in the first place.

Yeppers. I expect that there's gonna be a whole lot of hand-wringing in Utah over the next week or so... possibly even for over the next couple of years.

Damn users, running away when we sue them!

[KWTm]

The slump, McBride said, "has been primarily attributable to significant competition from alternative operating systems, including Linux." McBride listed IBM, Red Hat, Microsoft, and Sun Microsystems as distributors of Linux or other software that is "aggressively taking market share away from Unix."

Furthermore, McBride also noted, "These alternate distributors neglect to sue their customers, a service which we provide for our own customers, and thus they are able to undercut our price of $699 per customer. Despite making a concerted effort to protect our intellectual property through the legal system, IBM has failed to buy us out, so the expected funds did not materialize which had been earmarked for expansion plans for my summer cottage --I mean, er, corporate conference facilities.

"We expect our recovery to be delayed somewhat while we initiate the appeals procedure. At that point, we anticipate a healthy rebound, as our business partner tells one of those investment firms to give us more money.

"Even though shares of our stock cost less than an order of French fries at McDonald's, we want to allay any concerns about being delisted for having a low price. Our accountants have said ... er, I mean ... our accountant has said that we can simply do a stock merge, to have fewer shares, each of which cost more. As the price drops further and we merge more shares, we anticipate that it will be at least one week before all the shares are merged into a single share that costs $1.30. By that time, we should have identified another customer whom we can sue. It should not take too long to identify since we don't have a very long list to look through."