Who’s Really Behind SCO?

Who’s Really Behind SCO?

Steven J. Vaughan-Nichols

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 they’ll get Linus Torvalds and his little operating system, too. That’s not how I see it happening. Microsoft loves SCO’s actions, but it didn’t start them.

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

In 2001, Caldera bought SCO.

Caldera’s 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 wasn’t easy to do. It also had high hopes of taking SCO’s decayed, but fundamentally strong, reseller channel to sell Linux as well as Project Monterey, SCO’s joint operating system project with IBM.

But almost immediately after Caldera bought SCO’s operating systems division, IBM decided that it didn’t 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 SCO’s first legal actions.

Then in the spring of 2002, the Canopy Group, SCO’s majority owners, apparently decided they wanted a change in direction and maneuvered Caldera’s 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 group’s 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 Canopy’s executives; and a successful law suit against a former employer, IKON Office Systems.

Could Canopy’s 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 didn’t settle.

Still, launching a major legal action entails major money, and SCO didn’t have it. But in February 2003, Sun quietly bought a Unix license from SCO. In early March, SCO launched its IBM lawsuit. Coincidence? I don’t think so.

Why would Sun do this? First, IBM’s AIX and pSeries servers are major competitors to Sun’s Solaris and SPARC systems. Remember: At the start, this was SCO vs. IBM, not SCO vs. Linux. Secondly, Linux on Intel has eroded Sun’s 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 SCO’s 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 can’t 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 I’m no financial expert, I’ve read SCO’s public documents on the deal and I’ve done some research on PIPEs. Because of that, it seems to me that SCO’s PIPE deal is more favorable than most PIPE deals.

Is there a connection? There’s 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 who’s really behind SCO’s actions?

First and foremost, it’s Canopy and SCO’s current management. What really kicked it into gear though was Sun’s 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 it’s enough for me.

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eWEEK.com Linux & Open Source Center Editor Steven J. Vaughan-Nichols has been using and writing about Unix and Linux since the late ’80s and thinks he may just have learned something about them along the way.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in eWEEK.