SCO Group Files Chapter 11

Updated from 5:06 p.m. EDT

SCO Group

(SCOX)

and its SCO Operations unit filed for bankruptcy protection Friday, just one month after a judge in Utah dealt a crushing blow to the company's Unix claims.

Following the bankruptcy filing, shares of SCO sank 28 cents, or 43%, to settle at 37 cents.

The

ruling that may have sealed SCO's fate came in August when a U.S. District Court judge sided with

Novell

(NOVL)

on most of SCO's claims for owning Unix copyrights.

SCO said its board unanimously determined that a Chapter 11 reorganization was in the best long-term interest of the company and its subsidiaries, as well as its customers, shareholders and employees.

The Lindon, Utah, company plans to maintain all normal business operations throughout the bankruptcy proceedings. Subject to court approval, SCO and its divisions will use the cash flow from their consolidated operations to meet their capital needs.

"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," said Darl McBride, president and CEO of SCO. "Chapter 11 reorganization provides the company with an opportunity to protect its assets during this time while focusing on building our future plans."

Some of SCO's remaining claims were yet to be decided at trial, which was to begin Sept. 17. The trial will be stayed under bankruptcy law, according to Novell public relations director Bruce Lowry. "We'll be looking at our options," he said.

One point the trial was to determine was the portion of SCO's revenue from deals with

Microsoft

(MSFT) - Get Report

and

Sun Microsystems

(JAVA)

that now belong to Novell as a result of the Utah judge's decision.

When the judge found that Novell actually owned the Unix copyrights, it also ended SCO's claims against Linux developers. Although denied by most of the open source community, SCO had maintained that Unix code was embedded in Linux, and therefore, Linux developers owed royalties to SCO.

Since that determination, the open source community has been vocal on Novell blogs in its appreciation for that company's defense against SCO's claims.