Microsoft and SCO: FUD Brothers

Linux & Open-Source Center Editor Steven Vaughan-Nichols finally buys into the theory that Microsoft isn't just supporting SCO's anti-Linux efforts, it's bankrolling them.

So, we discovered on Thursday that Microsoft talked to BayStar Capital on SCOs behalf months before the investment house brokered a deal that led to SCO getting a cool $50 million round of funding. Well, well, well.

And recently, when SCO finally announced a real, live customer for its Linux IP license, it turned out that the company, EV1Servers.Net, is promoting Windows Server 2003 over Linux for its customers and is featured in a case study showing how Windows is better than Linux at Microsofts Get the Facts Web site.

OK, before these revelations I was willing to give Microsoft the benefit of the doubt. But I was wrong. Microsoft is behind SCO.

While Microsoft has been cheering SCO on and helping the Lindon, Utah, firm with purchases of excess Unix licenses, in the past I didnt believe that Microsoft was actually bankrolling the operation. And I still dont think that Microsoft is technically putting money directly into SCOs accounts. I do think, however, that the boys from Redmond look to be making sure that SCO has the money it needs to continue its reckless course of business by litigation.

And I still dont think, as some would have it, that when Bill Gates wiggles his fingers, SCOs Darl McBride launches another Linux FUD attack. At the same time, if it wasnt for Microsofts backing, SCO would most likely be trying to settle with IBM, and AutoZone and DaimlerChrysler would never have seen a SCO attorney at their doors.

If you look at SCOs financials, its clear that SCO needed that $50 million largely to stay afloat. Its also crystal-clear that Linux IP licensing isnt bringing in the dough. In the last quarter, SCOsource, SCOs IP division, made a whopping $20,000. I had a better quarter than that!

I doubt that the SCOsource program will be doing better anytime soon. SCOs Blake Stowell told me that the EV1Servers.Net deal was in the seven-figure range. EV1Servers.Nets CEO Robert Marsh responded, "We did agree to a one-time payment. However, we did not agree to pay a seven-figure cash payment."

So, whos right? I suspect they both are. Let me suggest a possible scenario. Suppose Microsoft heavily discounted EV1Servers.Nets Server 2003 licenses in return for EV1Servers.Net agreeing to pay SCO for its IP license. The net result of such a package deal could be that SCO gets over a million for its licenses, while EV1Servers.Net doesnt exactly shell out a seven-figure cash payment.

I dont have a bit of proof for this notion, but it would explain the facts, and it would certainly be a win-win for all three parties, wouldnt it? Microsoft would get an anti-Linux, pro-Server 2003 story while funneling revenue to its anti-Linux stalking-horse SCO. SCO would get more cash, and it could finally say that it has a real Linux IP customer. And EV1Servers.Net, when all is said and done, would pay a minimal price for its Server 2003 licenses.

Unfortunately for SCO, even if that theoretical scenario were to be true, I couldnt see Microsoft being able to afford to pull off such a trick many more times. As for SCO finding Linux IP customers on its own, well, the biggest company that has one, Computer Associates, has denounced it. With a customer like this, who needs an enemy?

In the bigger picture, SCO isnt doing well. Regardless of whether you think SCO can win in the courts—and, personally, I think Ill see pigs fly first—McBrides mission was to bring SCOs stock price up. For a while, SCOs anti-Linux FUD and lawsuit saber-rattling worked. But, since the news of Microsofts involvement and SCOs newest lawsuits, SCOs stock has fallen to less than $10/share from its $20 range in the fall.

In response, SCO announced that it would buy back up to 1.5 million common shares of its own stock over the next 24 months, since, at its current price, the stock represents an "attractive investment opportunity." I dont think so! From where I sit, SCO is simply trying to prop up its stock price.

Thanks to Microsofts funding, both indirect and direct (in the case of the Unix license purchase), SCO probably has the cash to keep its head above water and its stock price in the $10 range. And, thanks to Microsofts funding, well continue to see SCO spreading Linux FUD. The Evil Empire lives. Linux & Open Source Center Editor Steven J. Vaughan-Nichols has been using and writing about operating systems since the late 80s and thinks he may just have learned something about them along the way.

/zimages/2/28571.gifCheck out eWEEK.coms Linux & Open Source Center at for the latest open-source news, reviews and analysis.

Be sure to add our Linux news feed to your RSS newsreader or My Yahoo page: