McBride Ousted At SCO, Lawsuits To Continue

Lindon (UT) - The SCO Group plans to emerge from Chapter 11 soon and revealed that not only will it modify its business strategy towards mobile products, it will also replace chief executive officer Darl McBride and pick up the Linux and Unix license lawsuits against IBM and Novell.

The new owner of The SCO Group, investment firm Stephen Norris Capital Partners (SNCP), is planning to open a new chapter in SCO’s Linux lawsuit history, which started back in March of 2003 when the company filed a $1 billion suit against IBM. As part of its plan organization, SCO announced that it will appeal the proceedings, which will begin with an appeal against a key decision in favor of Novell from August 10, 2007, which also impacts the lawsuit against IBM.

"SCO respectfully disagrees with those rulings, in a summary judgment context, and intends to appeal at its earliest opportunity," the company wrote in regards to the Novell case. This judgment entitles Novell to collect SVRX royalties previously received by SCO from Sun Microsystems and Microsoft, which amount to $26 million, or more $37 million including interest.

Most of SCO’s claims against IBM have been dismissed or narrowed following the August 10 Novell ruling. A summary judgment in this case will require "certain further proceedings before it becomes a final order and subject to appeal," SCO said. The company noted that it intends to appeal once this ruling is final.

The appeal process, however, will happen without Darl McBride. SCO said that the implementation of the restructuring plan "requires" a change of the chief executive officer of the company. A new CEO will be named by the board when the plan becomes effective. McBride isn’t leaving SCO voluntarily. The Salt Lake Tribune reported that McBride "regrets" that he is being "pushed out" of the company. "Clearly when we draw up a battle plan for what we’ve been working for the last several years, trying to get SCO’s intellectual property rights fought through in the courts and the marketplace, the endgame didn’t have this sort of outcome for me personally," McBride told the newspaper.

The plan foresees SNCP to acquire all assets of The SCO Group for $5 million. Over the course of 5 years the investment firm will make up to $95 million available as a loan to the company, at 17% interest, which will need to be paid to SNCP on a monthly basis. Current claims against the company are more than $3.1 million.

SNCP also indicated that it will drop SCO’s business strategy of the past and not continue to compete in the server market. The company said that competitors have achieved a "brand recognition" and a "market presence" that "may prevent" SCO from obtaining and retaining market share in this segment. Instead, the firm now apparently looks for opportunities in the mobile applications market and interestingly, the firm noted that it believes that its success in this market will depend (in part) on the outcome of the pending litigation.

"Based on the explosive mobile phone adoption in emerging markets such as India, China, Middle East and Afrca, SCO Group recognizes that both consumer and enterprise mobile solutions to be a significant opportnity for the company. Research indicates that mobile phones far out sell personal computers and as such, many consumers in these emerging markets are using their mobile device in lieu of a personal computer. SCO wil continue to deliver and innovate mobile solutions to best exploit the growth in these markets," the company said.