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Who’s really behind SCO?


Is Microsoft behind SCO? Well, of course it is. Do you really think Microsoft needed a new SCO Unix license? Please!

But you can forget about Bill Gates and Steve Ballmer meeting by some high-tech Redmond cauldron at midnight to plot about how theyll get Linus Torvalds and his little operating system, too. Thats not how I see it happening. Microsoft loves SCOs actions, but it didnt start them.

So who did? To find the answer, Id like to recount a brief history of SCO and Caldera. Trust me: It explains a lot of whats happening now.

In 2001, Caldera bought SCO. Calderas leadership hoped that with this move the company could take as much of Unix and open sourcing as possible into Linux. It soon found that it wasnt easy to do. It also had high hopes of taking SCOs decayed, but fundamentally strong, reseller channel to sell Linux as well as Project Monterey, SCOs joint operating system project with IBM.

But almost immediately after Caldera bought SCOs operating systems division, IBM decided that it didnt want to release Monterey (now named AIX 5L) on the Intel platform. IBM wanted to release Monterey only on its own power-based pSeries computers. With this one move, IBM took out what Caldera had thought of as its future operating system. Caldera had planned on taking the best of what it could legally use from Unix, the AIX variant and Linux and develop a Linux system with the functionality that only Linux 2.6 is now delivering.

It was this IBM move that would eventually lead to SCOs first legal actions.

Then in the spring of 2002, the Canopy Group, SCOs majority owners, apparently decided they wanted a change in direction and maneuvered Calderas pro-Linux executives out of the company.

Canopy did this, I think, because it had grown tired of waiting for the Linux business to grow, even though Caldera had just helped create the enterprise business UnitedLinux consortium. I also think that the groups resentment toward IBM had never cooled.

It made that change by hiring Darl McBride and renaming Caldera The SCO Group in the summer of 2002.

McBride was an interesting choice. Although he had high-tech executive experience, he had never worked with Linux or open source. What he did have, though, was a good track record at getting investment capital; familiarity with Canopys executives; and a successful law suit against a former employer, IKON Office Systems.

Could Canopys executives have been thinking from that summer of taking legal action? In McBride, the group had someone who knew how to obtain funding and had no fears of marching into court.

No one (except the players) knows exactly what happened next. But the long and short of it is that IBM didnt settle.

Still, launching a major legal action entails major money, and SCO didnt have it. But in February 2003, Sun quietly bought a Unix license from SCO. In early March, SCO launched its IBM lawsuit. Coincidence? I dont think so.

Why would Sun do this? First, IBMs AIX and pSeries servers are major competitors to Suns Solaris and SPARC systems. Remember: At the start, this was SCO vs. IBM, not SCO vs. Linux. Secondly, Linux on Intel has eroded Suns vital Solaris/SPARC market far more than Windows has. The more trouble SCO can cause IBM and Linux, the better it is for Sun.

Since then the suit has grown bigger and broader. At the same time, though, Sun and Microsoft have continued to support SCO with further licensing deals, and SCOs legal bills have grown bigger.

So to continue its funding, SCO has had to go to BayStar Capital for $50 million of additional cash via a Private Investment in Public Entity (PIPE) deal. (Historically, PIPEs are very risky and used only by companies who cant get cash in any other way.)

And, as it happens, sources report that BayStar also invests in PIPEs on behalf of Microsoft. (BayStar spokesman Bob McGrath has disputed that claim.)

While Im no financial expert, Ive read SCOs public documents on the deal and Ive done some research on PIPEs. Because of that, it seems to me that SCOs PIPE deal is more favorable than most PIPE deals.

Is there a connection? Theres nothing I can prove, but out of the dozens of companies that offer PIPEs, I find it hard to believe that mere chance led SCO to such a comparatively good deal with Microsoft-connected BayStar.

So whos really behind SCOs actions?

First and foremost, its Canopy and SCOs current management. What really kicked it into gear though was Suns early financial support.

In short, SCO started the fire, Sun supplied the lighter fluid and Microsoft and Sun together are adding the firewood. There is no smoking gun, but there is a fire and smoke. That may not be enough for some people, but its enough for me.

A version of this story first appeared in eWEEK.

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