Wednesday, May 6, 2009

News from SCO

Two bits of news about SCO. First, in the bankruptcy case the US Trustee has moved to convert SCO to Chapter 7 liquidation. Second, in the appeal of the judgement in the Novell case, the appeals court heard oral arguments and my first impression is that they weren't impressed with SCO's arguments.

In the appeals hearing, it sounded very much like at least two of the three judges were looking at the contracts themselves, and at SCO's arguments, and going "You know, you're arguing that when the contract says "excludes" it really means "includes". We aren't buying that.". I expect the appeals ruling won't be favorable to SCO.

On the bankruptcy front, the next hearing is June 12th. I suspect the appeals ruling will be in in at least a preliminary form before then. If it goes against SCO, that pretty much shreds the last hope SCO had for postponing the inevitable. And SCO really doesn't want to end up in Chapter 7. When that happens the current executives lose their jobs and the US Trustee takes over management of the company. He's got no dog in the fights between SCO and Novell and IBM, his only interest in them will be to settle them at the minimum cost to the bankruptcy estate. And he'll have access to all SCO's corporate and legal records. Attorney-client privilege won't apply because, as of his appointment, he'll be the client. If he finds records showing SCO knew they didn't have a case when they filed it, he'll have no problem whatsoever filing a sworn statement to that effect in a settlement deal and turning over the records to back it up. That could place BSF in a very bad position. Not that they're in a good one now, mind you.

I've said it before: SCO miscalculated the cost to IBM of fighting. SCO assumed IBM would look at the demand for a few million dollars and count it cheaper than the cost of fighting it out in court and winning. IBM looked at a threat to half or more of their annual revenue world-wide (their gross revenue tops $100 billion), multiplied by decades, and decided a few million was cheap. I can imagine the conversation with their lawyers: "You know it's going to cost to fight this." "Yes, we know. Here's a quarter of a billion for the initial deposit, call us when it gets low and we'll add more.". To give you scale, that's half a percent of the first year of the revenue at risk. IBM's looking at 50 years, most likely (which is less than half the time the company's been in business, they've got current product lines that're nearly that old).

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