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Last Shot for SCO Group

With most of Wall Street betting against it, SCO Group (SCOX) could face a last chance at redemption in a series of court battles that will play out over the next few weeks.

Tiny SCO is best known as a legal play on its various courtroom strategies to claim rights to the technology underlying the Linux operating system. But with a string of setbacks in its rearview, SCO currently trades 75% below its 52-week high and is still the target of aggressive short-sellers.

It's been nearly 22 months since the company initiated its battle over Linux with a multibillion-dollar suit against IBM (IBM - Get Report). In that suit, SCO claimed IBM breached a contract with SCO by misappropriating Unix code, which SCO claims it owns, in IBM's Linux business.

Since then, IBM has countersued, rival software outfit Novell (NOVL) has claimed ownership of the Unix copyrights, SCO has sued Novell for slander, and SCO has sued Linux users DaimlerChrysler (DCX) and AutoZone (AZO).

Investors initially liked the prospect of SCO potentially harvesting licensing fees from a large number of Linux users, and the stock has been above $10 as recently as April. But the optimism steadily dissipated as SCO has enjoyed little success pressing its case in court over the past year, even with high-profile attorney David Boies handling the case. Among other setbacks, a judge dismissed most of the Daimler suit.

Dion Cornett of Decatur Jones, the only analyst who still covers SCO, noted that his pick of the year for 2004 was a short on SCO, whose volatile shares started 2004 at $17 and swung to as low as $2.76 in November. (Cornett upgraded his rating to market perform from sell in August when the stock was at $4.05, largely because he thought the easy short money had been made and a settlement looked more likely.)
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