SCOs Short-Term Win Wont Salvage Its Future

Opinion: If SCO truly felt it had a winning case against IBM, it wouldn't make sense to delay as its once-successful business crumbles.

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.

/zimages/5/28571.gifRead 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.