Private-equity firm Stephen Norris & Co Capital Partners said on Thursday that it and unnamed Middle Eastern partners will fund SCO Group with up to $100m to take over the financially beleaguered Unix company, move it out of bankruptcy protection, complete its unsuccessful Linux litigation, and take it private.
SCO's board has approved the transaction and the company is expected to exit bankruptcy in 2008. Stephen Norris & Co Capital Partners (SNCP) said its reorganisation plan "will also enable the company to see SCO's legal claims through to their full conclusion".
SCO sells a version of Unix that never achieved the popularity of rival products from companies such as IBM or Sun, but it has been better known in recent years for its ill-fated legal action that asserted Linux infringed its Unix intellectual property. The case largely fell apart when a court found that Novell still owned the Unix copyright.
Despite an attempt to begin a new line of mobile-computing software called Me, the company's revenue dropped steadily from $79m (£40m) in fiscal 2003 to $22m in fiscal 2007, during which the company reported a loss of $6.8m. And, last week, the company announced layoffs of 30 employees from a total staff of about 115.
Despite these figures, Stephen Norris, managing partner of SNCP, was bullish on SCO's prospects.
"We saw a tremendous investment opportunity in SCO and its vast range of products and services, including many new innovations ready or soon to be ready to be released into the marketplace," Norris said. "We expect to quickly develop these opportunities and to stand behind SCO's existing base of customers and partners."
It's not clear how much the investors will have to pay to acquire their controlling interest and take SCO private. News of the investment sent SCO's shares, traded over the counter since its delisting from Nasdaq in 2007, up three cents per share to nine cents, giving the company a market capitalisation of about $2m.
The companies did not disclose who the Middle Eastern partners are, but Norris has worked with some partners in the area on more than one occasion. He has "acted as a principal financial adviser to Prince Alwaleed bin Talal Al Saud of Kingdom Holding Company in structuring and negotiating the re-capitalisation of Citibank" and worked on "the offer by a major Saudi Arabian investment firm for Lamborghini in Italy", according to his biography on the SNCP website.
In October, SCO had disclosed a plan to sell its Unix assets to York Capital Management for up to $36m. It appears now that the Unix assets will remain with SCO.
"This significant financial backing is positive news for SCO's customers, partners and resellers who continue to request upgrades and rely upon SCO's Unix services to drive their business forward," said Jeff Hunsaker, SCO's president and chief operating officer, in a statement.
Investing in SCO has proven difficult in the past. One fund, BayStar Capital Management, invested $50m in 2003, but unwound the deal in 2004 after much bickering.
Talkback
This sounds like some one in the Middle East is being "scammed" out of a lot of money.
"unnamed Middle Eastern partners will fund SCO Group with up to $100m (£51m) to take over the financially beleaguered Unix company"
Would that be His Royal Holiness Shiekh Al-Steve bin Ballmer?
I'd have hated to have seen SCO go out of business before the Judge had had a chance to deliver his verdict.
As they are under bankruptcy, this investment (as far as I know) proposal will have to be ok'd by whatever court has oversight of the bankruptcy proceedings.