SCO to Sell Unix Wares for $36 Million?

Published: October 30, 2007

by Timothy Prickett Morgan

The trials and tribulations--mostly trials, these days--of commercial Unix software provider The SCO Group could be mercifully be coming to an end. Or, maybe not. In filings with the Securities and Exchange Commission and the bankruptcy court that is hearing SCO's Chapter 11 bankruptcy case, SCO said that it has found a buyer for its Unix and other software assets. Now there are four questions that need to be answered: Is this buyer really the ultimate buyer for the Unix IP? Or is there someone else behind it? Will the Delaware court go for it? And will this end the various lawsuits that SCO is entangled in?

SCO did not really say much about the deal in its filing with the SEC. "On October 22, 2007, the company entered into an agreement whereby a purchaser intends to acquire substantially all assets used by the company in connection with its SCO Unix business and certain related claims in litigation, and to provide financing to the company, pursuant to Section 363 and 364 of the bankruptcy code. On October 23, 2007, the company filed a motion with the bankruptcy court relating to this proposal."

SCO filed a motion with the Delaware bankruptcy court, providing more details concerning the transaction. (You can read this filing compliments of the Groklaw site, which has been following the blow-by-blow legal action on the SCO and other IT-related lawsuits.) In that motion, SCO says that it has negotiated a deal with a company called JGD Management Corp, which is doing business as York Capital Management, to sell JGD/York all of the assets related to its Unix software business and cross-licensed and other assets that have been incorporated into SCO's Hipcheck remote administration software, and its Me Inc mobile connectivity software. (The latter is actually spun off into a separate corporation, apparently.) Everything related to the Unix business--from the source and binary code to UnixWare and OpenServer, licensing agreements, intellectual property, trademarks, customer lists, and right on up to the PCs that employees work at and the chairs they sit on--are included in this acquisition. The deal does not include any cash that SCO has on hand, any tax refunds it is due, any Me Inc code or intellectual property not related to the Hipcheck product, or any settlements that SCO might get from its lawsuits with IBM, Novell, and Red Hat.

JGD/York is willing, for whatever reason, to spend $36 million for this, and has plunked down a 5 percent deposit that is refundable if the court does not approve of the idea of an asset sale. JGD/York is paying $10 million in cash, up to $10 million for a legal credit facility to help SCO continue its litigation, and $10 million for a 20 percent stake in SCO's legal windfall, should one appear, and $6 million for a revenue sharing agreement pertaining to SCO's arm's length Me Inc business.

A few days after making the announcement, there is a rumor going around that the Delaware bankruptcy court has approved the deal, but this is not true. What has happened, if you read the documents, is that the court has set a hearing date of December 5 to consider the motion. This gives other qualified bidders a chance to come in and try to buy up the Unix assets, of course.

The question now is this: Will the open source community get its act together and buy those assets and put them in the public domain for once and for all? There is not much economic value in the Unix code itself--unless you can convince the jury of it in a trial that assesses the economic damage done to SCO from Windows and Linux competition--but there is still plenty of value in the code itself, which can be used to create a new Unix support business and to bolster Linux and other operating systems. The Unix assets that Novell and SCO own--and it is still not clear who owns what--can still be put to good use for the industry. And maybe, just maybe, JGD/York can create an open source software product for the merged UnixWare and OpenServer products, backed by a global support organization that can service the still substantial installed base of SCO Unix customers out there.

That might be a nice fairy tale ending, but with $36 million on the line, the hair on the back of my neck and this sinking feeling in my gut says that someone else is interested in SCO's Unix assets for some other reason. At some point, someone will follow the money trail and figure out what is really going on, and who is really behind it.

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