SCO-Novell Lawsuit Hits Delay

SCO Group's seemingly endless legal wrangling over open-source intellectual property has been buffeted by another delay. A hearing in SCO's lawsuit against Novell, which had been scheduled for March 8 in Federal District Court in Utah, has been pushed back until May 25. At that time, Judge Dale Kimball will hear arguments on a Novell motion to dismiss the case.

The delay is the result of scheduling conflicts on the part of the two companies' legal teams. Both firms agreed to the delay, SCO and Novell independently confirmed.

The news comes two months after SCO won a legal victory suit against IBM over open-source intellectual property, which nevertheless is likely to delay that case's ultimate resolution. In a ruling handed down Jan. 4, Judge Brooke Wells ordered IBM to provide SCO with source code for Big Blue's AIX and Dynix operating systems. SCO has long sought that software, which it intends to examine in hopes of finding code it believes infringes on its copyrights. IBM has until March 18 to show SCO that code.

Prior to that ruling, the IBM case had been expected to come to trial in November. Now, Judge Wells has set March 25 as the date at which both IBM and SCO are asked to come back to her with suggestions on scheduling a new trial date.

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Earnings Restatement

Separately, SCO this week revealed it will have to refile financial statements for the quarters ending Jan. 31, 2004, April 30, 2004, and July 31, 2004, due to what it called "certain accounting errors." These errors stem from the way SCO accounted for stock it issued as part of its compensation plans. In a statement, SCO said the revisions aren't expected to change the company's previously reported net loss or its earnings per share for its fiscal year ended Oct. 31, 2004.

One impetus for the restatement appears to be the way SCO handled the accounting when it repurchased a high-profile $50 million investment made in the company by Baystar in 2003.

Baystar no longer holds any preferred shares, according to SCO spokesman Blake Stowell. "All of their preferred shares were converted to common shares," Stowell says. "They had 2.1 million shares of SCO stock. I believe they [now] hold something around 900,000 shares."

At $4.10 a share, the price SCO was trading on the NASDAQ exchange at press time, that's worth $3.69 million. Under the terms of Baystar's holdings, should the investment firm wish to further divest its holdings, it can only sell stock worth up to 10 percent of the average trading volume on any given day, Stowell says. SCO currently has no special relationship with Baystar, Stowell adds.

On the product front, SCO is moving ahead with the development of version 6.0 of its OpenServer Unix. The product just went into beta release. SCO hopes to get a final version out the door by early summer, Stowell says.