Software maker and Linux litigant SCO
has filed for chapter 11 bankruptcy protection.
The move allows SCO to reorganize its business while keeping debt collectors at bay. Firms filing for bankruptcy protection also are forced to stay all legal cases, affecting SCO's proceedings against Novell
as well as a group of Linux users.
"We want to assure our customers and partners that they can continue to rely on SCO products, support and services for their business critical operations," Darl McBride, chief executive for the SCO Group, said in a statement.
"Chapter 11 reorganization provides the Company with an opportunity to protect its assets during this time while focusing on building our future plans."
The announcement comes one month after the firm lost a crucial battle in its legal campaign against Novell.
In August, a federal judge ruled that not SCO but Novell owns the intellectual property to the Unix operating system. The ruling eliminated the foundation from underneath SCO's legal case but also meant that the firm would owe Novell tens of millions in dollars in license fees.
A potential claim from Novell would likely have outstripped SCO's assets, forcing the company into bankruptcy. Those claims however would have been addressed in a future court hearing which has now been stayed.
A spokesperson for Novell said that the company is exploring its options and declined further comment.
Investors abandoned SCO stock after the August ruling. News about the bankruptcy filing further sent down the stock price by 43 per cent on Friday in after hours trading.
The bankruptcy filing is unlikely to be a result of mounting legal fees for SCO's prolonged battle. The firm in 2004 agreed to pay its lawyers a flat fee of US$31m (AUD$36.8m) for the remainder of the legal proceedings, in exchange for a 20 to 33 per cent cut of a potential legal settlement or damages.