SCO Investor Hints at Settlements

Stephen Norris said he and his unnamed Middle Eastern partners hope their planned investment of up to US$100 million in the bankrupt Utah company will lead to a settlement of pending suits and allow it to concentrate on building SCO's Unix software business.

"We don't view ourselves as being in the litigation business," Norris said in a telephone interview. "We'd like to find a way to resolve the current situation in a manner that balances a lot of people's interests and allows us to build a business and not focus on paying enormous amounts of money to lawyers."

Awaiting Approval

SCO, headquartered in Lindon, Utah, disclosed on Feb. 15 that it has a preliminary deal with Stephen Norris Capital Partners for the investment that would give the New York fund control of SCO and take it private.

The deal, however, still needs approval by a federal bankruptcy judge in Delaware, where the company filed for protection from creditors last year. Norris also said his company has not finished its due diligence investigation of SCO's books and legal matters, and that any deal is still pending those results.

Rob Enderle, an analyst and founder of the Enderle Group, said Monday that settling the litigation and infusion of new capital would help SCO retain clients and perhaps expand the Unix business.

"Unix is far from dead," Enderle said.

Some Life Left

But IDC analyst Al Gillen, an expert in operating systems, said that although Unix is still a valuable operating system, it has been losing customers to open source Linux and giant Microsoft's (Nasdaq: MSFT) software products, among others.

"It's very challenging market conditions, to be sure," he said.

Suing IBM, Novell

With SCO's business for its Unix software products declining because of competition from the Linux operating system, The SCO Group sued IBM in 2003 for $5 billion. Although SCO contends that IBM put some of the Unix code that SCO claims the copyright to directly into Linux, its larger claim is that IBM used Unix as the basis for making significant changes to Linux that made it a viable commercial product. That lawsuit is stalled pending the outcome of bankruptcy proceedings.

SCO subsequently sued Novell for interfering with its Unix ownership rights. But a federal judge ruled against SCO last year and set trial for April on possible fees of up to $30 million plus interest that The SCO Group could owe Novell for use of Unix.

Advocates of open source software were outraged by the SCO suit against IBM because what they viewed it as a commercial assault on the movement to open up software code for public use.

Norris expressed surprise Monday at the vehemence of the comments on blogs about his proposed investment but said the company hoped a settlement would put the matter behind it.