SCO Files For Chapter 11 Bankruptcy Protection

Unix distributor The SCO Group filed for Chapter 11 bankruptcy protection on Friday, just days before the scheduled start of a trial that could see the company hit with legal penalties worth more than its total assets.

In a statement, SCO said its board of directors "unanimously determined that Chapter 11 reorganization is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders and employees."

SCO also has filed a petition for reorganization in addition to the Chapter 11 filing. SCO said the filings will help ensure that it "will not have any interruption in maintaining and honoring all of its commitments to its customers" and will allow it to pay its vendors.

A judge recently ruled against SCO in its long-running lawsuit against Novell. Judge Dale Kimball of U.S. District Court in Utah on Aug. 10th said Novell, and not SCO, owns the copyrights to the Unix operating system.

As a result, Kimball ruled that SCO must remit to Novell a portion of the fees it has collected from selling Unix licenses -- mostly to Sun Microsystems and Microsoft. That could amount to as much as $25 million. The amount is to be decided at a trial that's set to start Monday.

The case is scheduled to proceed as a bench trial, meaning that Kimball -- not a jury -- will decide the outcome.

As of April 2007, the latest date for which financial numbers were available, SCO had just $7.8 million in cash or equivalents and total assets of only $20 million, SEC records show.

In a recent interview with InformationWeek, SCO CEO Darl McBride said he was confident that SCO could raise funds to cover any damages it might be forced to pay Novell by licensing its enterprise mobility software.