In an attempt to reassure shareholders and limit runaway legal costs, SCO has announced that it is restructuring its arrangement with Boies, Schiller & Flexner, the company’s legal firm. SCO is currently in a protracted battle with the IBM and the Linux community over claims that it owns sections of the Linux kernel source code, and claims that the GNU Public License is invalid.
SCO has now agreed to pay BSF US$31 million (€25.5 million) for the entire legal case, but but they will now receive a higher proportion of any settlement fee if SCO win the case. BSF now are now looking to get up to 30% of any damages awarded to SCO.
With things not looking too bright for the UNIX provider, 30% of nothing may not make BSF very happy. Recent developments in the case with IBM have seen SCO’s evidence based on sections of the Linux kernel code dismissed. They have even been accused for manipulating their source code to make it look more like Linux kernel by omitting lines. Some of the code put forward as evidence does not even appear in the kernel, is public domain, or is exempt because of compatibility standards.
SCO has cash and securities amounting to about US$43 million (€35.35), so even if they lose they’ll have US$12 million (€9.87) in the bank. Legal costs for SCO have been becoming increasingly expensive of late – last quarter’s bill came to US$7.3 million (€6 million), contrasted with the US$15 million (€12.33 million) the company spent in the five quarters previously.SCO’s president and CEO, Darl McBride, is still upbeat about his company’s future: “Several positive developments fell into place for us this quarter that strengthened the Company’s overall position. We successfully delivered on our strategy to restore profitability within our UNIX business which is generating positive cash flow. At the same time, we saw a nice uplift from SCOsource licensing revenue. In addition, we closed the BayStar transaction and as announced today, we implemented a Shareholder Rights Plan that will help protect the Company from any potential undervalued takeover attempt. Finally, we are pleased to have entered into a letter of intent with Boies, Schiller & Flexner that not only demonstrates their belief in SCO’s legal case but will also provide SCO with greater financial flexibility. We remain steadfastly committed to enforcing our intellectual property rights on behalf of our customers, employees and shareholders. Through the combination of the quarter’s positive developments and our current cash position, we are well-positioned to pursue our current litigation through its conclusion.”