Also: Debtor is suffering under mounting legal costs as it is steadily beaten into submission by Apple (AAPL) and its notoriously vicious legal team.

Pystar’s bankruptcy declaration will delay Apple’s copyright-infringement suit against it, but only temporarily. In the meantime, the company will be allowed to continue to do business and perhaps, strengthen its defense. But on June 5, the date of its bankruptcy hearing, things could get nasty. Psystar will almost certainly be forced to reveal its financial backers, and if they are the nefarious Svengalis that Apple claims, there may be hell to pay.

Looks like Sue was right, and the road to which he referred was a short one. The struggling telecom company has hired counsel to explore a bankruptcy filing, The Wall Street Journal reports. Nortel, well aware what such reports can do to investor confidence, insists that no such filing is imminent. The company does, however, acknowledge that it has engaged advisers to help it weather the current economic storm. Just who has Nortel hired? Word on the street says Lazard Ltd. and law firm Cleary Gottlieb Steen & Hamilton.

Grim news for Nortel, which has spent the past several years trying to recover from the general downturn in the telecom industry and a nasty accounting scandal. With apparently very little success.

In a statement Wednesday, the company said, “Nortel is hard at work reshaping the business to even better serve our customers. There are those who fuel negative speculation, but there are many more who believe that Nortel has put in place the necessary plans to strengthen our financial footing and reset our cost base.”

A week after announcing the closure of a fifth of its stores. in the U.S., the struggling retailer succumbed to the inevitable and filed for bankruptcy protection.

This just weeks before the start of the holiday shopping season. A bleak portent for the retail sector.

“Despite aggressive efforts to secure vendor support, vendor concerns about the company’s liquidity and ability to pay for its purchases in this difficult economic climate have escalated considerably,” the company said in a statement. “Faced with the need to secure ongoing vendor support and to ensure adequate merchandise flow to stores during the important holiday season, the company has determined that it would be in the best interest of its stakeholders to file for reorganization relief under Chapter 11.”

BlockBuster must be thanking its lucky stars it chose to abandon its $1.3 billion gambit for the foundering electronics chain….

Wired News: So how’s business been since this ruling?
Darl McBride: This has zero to do with our open-server business. That has nothing to do with these fights. That’s 70% of our revenue. And finally, it has nothing to do with our new mobility products we are working on. All of our product business is really unaffected by this ruling, other than the noises in our marketplaces.
–Wired News interview with Darl McBride, CEO and president of SCO Group, Sept. 10

ComputerWorld: Can SCO survive even if it ultimately loses the legal fights?
Darl McBride: I think it’s one of the more exciting times for this company. There’s a story my general counsel shared with me. By coming out right now and saying this is an exciting time, it’s like the boxer who has come out of the ring after getting all beaten up, and he comes over to his trainer and says, ‘The guy didn’t touch me.’ And the trainer says, ‘Then you better keep your eye on the ref, because somebody’s beating the living hell out of you.’ “
–ComputerWorld interview with Darl McBride, CEO and president of SCO Group, Sept. 6

When a company begins characterizing its assets as merely “those remaining,” as the SCO Group did earlier this year, bankruptcy is an inevitability. So it comes as little surprise to learn that the company’s hard-fought, but ultimately ludicrous, four-year legal campaign against Linux has ended in a Chapter 11 filing. Seems using litigation as a profit center to compensate for market losses isn’t such a grand idea after all.

“The Board of Directors of the SCO Group have unanimously determined that Chapter 11 reorganization is in the best long-term interest of SCO and its subsidiaries, as well as its customers, shareholders and employees,” the company said in a statement, adding that it has filed a petition for reorganization in addition to the Chapter 11 filing. SCO said the filings will help ensure that it “will not have any interruption in maintaining and honoring all of its commitments to its customers” and will allow it to pay its vendors.

The reorganization, it claims, “ensures business as usual.”

It’s worth noting, however, that the preceding is a “forward-looking statement.” And as we all know, those often involve risks and uncertainties that could cause actual results to differ materially from those anticipated …

(Darl McBride image courtesy Bill Stearns)