SCOs Short-Term Win Wont Salvage Its Future

By David Coursey  |  Posted 2005-01-20

SCOs Short-Term Win Wont Salvage Its Future

SCOs win in its request for a boatload of IBM Unix code and documentation is likely to accomplish only one thing: It will delay the trial on SCOs charges that IBM has violated its intellectual property rights.

What will be left of SCO when the case comes to trial is becoming a serious question. Originally scheduled for a November 2005 start date, the case now may not begin until sometime in 2006.

Read more here about SCOs win in its request for IBM Unix code.

SCOs decision last summer to remain a product company, as opposed to concentrating solely on the lawsuits, seems increasingly foolish. I supported the decision at the time, but I didnt imagine that the companys business could drop off so quickly. I also didnt imagine SCO would be so totally unable to make its case in the court of public opinion.

I dont know a soul who thinks SCO has a valid case. And its customers seem to think its products arent terribly valid, either. During the quarter ended Oct. 31, the company lost $6.5 million on revenue of $10.3 million. Thats down from revenue of $24.3 million for the same period a year earlier.

Perhaps more significantly, the "free money" SCO receives from licensing its Unix code plunged by 90 percent, from $10.3 million a year ago to $120,000 in 2004. Having the cash cow die might make it impossible for SCO to continue its legal wars with IBM and other companies while also remaining a product company.

Given the scant success SCO has enjoyed to date in the courthouses of America, most companies would have already found a way to settle. But SCO has little incentive, given that its core business is almost certain to die on its own. Thus, the company has nothing to lose by continuing its legal battles.

IBM has said it wont settle, which I normally wouldnt take seriously, except that IBM may think it will be cheaper to either win at trial or simply wait out SCOs demise.

Interestingly, the judge who granted SCOs request commented that the case may be as much about the contracts that brought ownership of Unix to SCO as it is about the IP issues themselves.

Novell—which owned Unix prior to selling it to SCO, which itself was later bought by the current ownership—claims it never sold the rights that SCO now claims to own. Its not even clear whether Novell owns them itself.

If SCO felt it had a winning case, it wouldnt make sense to delay as the companys business falls away. The plan had been for the winnings from IBM, Novell, Red Hat and the others on SCOs hit parade to give the struggling company the second, third and fourth winds that might be required to turn it back into the industry player it once was.

Next Page: Microsofts role in the market.

Microsofts Role

Not that SCO was ever a huge company in absolute terms, but it did once create what has since become popular: Unix running on Intel processors, only today we call it Linux. If SCO could somehow regain its position in whats become a hot market, well, thats at least part of what the lawsuit is about.

Another part looks like the continuing grudge match that Ray Noorda and other former Novell execs have waged against the companies that beat them in the marketplace. This was launched many years ago, and while Noorda is reportedly in poor health, the battle continues.

Besides IBM, this includes Microsoft and even the post-Noorda Novell. Microsoft is the odd player here, given its recent support of SCO. Of course, having IBM as a common enemy is what brought them together, not any desire by Microsoft to see SCO again become a successful operating-systems company.

More likely, Microsoft counts on SCO—should it win in court—just sitting back and collecting royalties rather than actively entering any Microsoft-competitive business. Or maybe Microsoft doesnt care what happens to SCO at all and is merely playing for the value of the FUD (fear, uncertainty and doubt) the lawsuit has created in the marketplace.

Click here to find out whether Unix vendors are losing market share to Linux and Windows.

Given the fortunes that still exist in Utah from Novell, WordPerfect and the rest of a computing industry that no longer exists there, SCO probably will be able to soldier on. Sour grapes are, I suppose, better than no grapes at all.

Heres how I think this ends: By the time the case(s) come to trial, SCO the product company will be gone. And after a loss in the courts, SCO the litigant also will disappear. Wednesdays decision in a Salt Lake City courtroom only delays what increasingly looks like the inevitable demise of a once-proud company..

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