SCO says there is 'substantial doubt' it will survive

With its cash reserves running out and its legal case against IBM unraveling, the SCO Group now says there is doubt that it will remain afloat.

SCO made the statement in its most recent quarterly U.S. Securities and Exchange Commission statement, filed Tuesday. The company cited its recent motion for Chapter 11 bankruptcy protection as well as a recent court setback relating to its intellectual-property claims as reasons for worry.

"As a result of both the Court's August 10, 2007 ruling and the Company's entry into Chapter 11, there is substantial doubt about the Company's ability to continue as a growing concern," SCO said in the filing.

Last month a judge with the U.S. District Court for the District of Utah ruled against SCO on several motions, finding that Novell, rather than SCO, owned the Unix copyright. Novell had sold SCO some Unix rights in the mid-1990s, but the court said that copyright was never assigned.

"The effect of these rulings was to significantly reduce or to eliminate certain of the company's claims in both the Novell and IBM cases, and possibly others," SCO said in its SEC filing. Several of the company's claims against IBM will be dismissed as a result of this ruling, SCO said in the filing, adding that there are still certain claims that remain viable, such as SCO's allegation that IBM engaged in unfair competition in its failed Project Monterey effort that was to create a Unix for 64-bit microprocessors.

The rulings may also cost SCO a lot of money. The court said that SCO would have to pay Novell for past licensing deals it had struck with Sun and Microsoft. This could amount more than $30 million, SCO said in its SEC filing. That's more than the $10.4 million in cash now held by SCO.

The rest of the 10-Q statement, which covers the quarter ended July 31, lists bad news.

The IDG News Service is a Network World affiliate.