Letter to Partners and Customers


Dear SCO Customers, Partners and Shareholders:

The SCO Group filed its formal Chapter 11 Reorganization Plan and Disclosure Statement with the Bankruptcy Court in Delaware on January 8th, 2009. The Plan is subject to Bankruptcy Court approval which will happen over the next few months. Over the course of this difficult period, SCO has sought primarily to provide a way forward for its loyal customers and partners. We believe that this plan advances our progress toward that goal.  

One month prior to filing for Chapter 11 bankruptcy protection, SCO received an adverse summary judgment ruling in the Novell case that Novell claimed was going to cost SCO nearly $40 million. Novell also requested that the court place SCO’s assets into trust to cover this potential liability. SCO firmly believes that that summary judgment was in error and will likely be reversed on appeal, but in the meantime the threat of a $40 million judgment and the requested trust put SCO’s business and customers at risk both in the UNIX business and in SCO’s nascent mobility business. If even a substantial amount of the claimed $40 million had been restricted by the court, SCO’s overall business would have been in jeopardy and our customers would have been left with options that would have been both costly and extremely difficult to implement. This prospect was not acceptable to SCO, so bankruptcy protection was sought.  

Since the filing of the bankruptcy, SCO has succeeded in proving that it does not owe Novell anywhere near the amount that Novell initially requested. Recently, a final judgment was entered in the Novell case in which it was ruled that SCO owes Novell $2.5 million, plus interest, and a trust amount of only approximately $625,000, which is markedly better than the situation SCO faced in September of 2007. As stated, SCO does not believe the evidence supports a finding that SCO owes Novell anything. Accordingly, SCO has formally filed its Notice of Appeal of this ruling. Many pundits believed that SCO would not last long enough to get to the appeals court, and Novell did all it could to prevent that from happening. With the protection of the Bankruptcy Court and support from customers and partners, we are now on our way to the Tenth Circuit Court of Appeals, our UNIX business has remained relatively constant, and we have some exciting partnerships and prospects for our mobility business.  

One of the goals we pursued during bankruptcy has been to seek outside investment to assist in paying off creditors, satisfying shareholders, and establishing a well-capitalized business with sufficient funds to move the business aggressively forward. SCO has been working over the past nine months with several investment groups to formulate an investment plan. With the tightening of the world financial markets, it has been difficult to secure a plan sponsor prior to the restructuring plan filing deadlines. However, SCO continues to work with investment groups who could potentially come forward with an investment plan to acquire certain SCO assets. The best assets the company can offer any potential purchaser are our products, customers, and employees. Key elements of SCO’s plans moving forward include the following:  

  • SCO intends to conduct a public auction to secure investment in its OpenServer product line as well as its mobile business to maximize an asset sale and to ensure the ongoing development of these businesses. Several investment groups have expressed interest to SCO in acquiring assets via a public auction. We believe that this approach will maximize customer and shareholder value and expedite the investor process. One goal of this approach is to separate the legal defense of its intellectual property from its core product business. This will ensure that the on-going revenue from its UNIX and mobile business stays with these core assets.
  • In the event that certain SCO assets are not sold, SCO will continue to sell and support its UNIX and mobile products and services, including UnixWare, OpenServer, SCO Mobile Server, and select mobile applications. SCO will also focus on the following key provisions: (a) an enhanced pricing and discount strategy, (b) an updated “True-up” licensing program with current customers, (c) reducing overall operating costs, (d) ship SCO UNIX Virtual product lines for VMware and Hyper-V to allow SCO legacy applications to run on modern hardware and, (e) ship FCmobilelife and FCtasks for the iPhone.  

Now in its 30th year, SCO has over 2 million servers that have been installed worldwide. SCO looks forward to implementing its new reorganization plan and to serving its valued customers and partners. This has been a very difficult year for all of us both with the issues SCO has dealt with in its business including bankruptcy and the world economy in general. There are still obstacles to overcome but we are committed to seeing this through, and to do everything within our power to ensure a smooth and uninterrupted continuation of the UNIX business for you, our customers and partners, for another 30 years.

More details, particularly around SCO’s business and product strategy, will be made available to customers and partners in the coming weeks.


Darl McBride
Chief Executive Officer
The SCO Group