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SCO Can't Sell "Linux Licenses" Worth a Damn

SCO Can't Sell "Linux Licenses" Worth a Damn

SCO's notorious SCOsource licensing program brought in all of $11,000 in the company's second quarter ended April 30, a fact that should warm of the cockles of all the Linux hearts out there that begrudge the company its Unix IP claims.

SCO's critics would like nothing more than to see it bankrupt itself pursuing what they believe are its groundless claims that Linux is little more than ripped-off Unix code. SCO basically says "fat chance" and claims to have all the financial resources it needs to see its legal crusade through to the end.

SCO CEO Darl McBride blames Novell for SCO's negligible license fees. He says it's muddied the waters and given prospective licensees pause by claiming that SCO doesn't own the IP. IBM's propaganda isn't helping either, he said.

SCO is hoping for a break in the logjam when the courts decide whether or not SCO's slander suit against Novell should proceed.

McBride said the judge promised a decision "in a few days" at a hearing earlier this week.

The suit should go a long ways to clarifying who owns what. In the meantime, SCO claims to have "significant" licensing opportunities on the table.

McBride also claimed that "The day will come when we will be able to show many, many documents that will contradict IBM's public posturing" that SCO has been unable to produce any evidence that Unix code went into Linux.

Such documents have been turned over to IBM under seal as part of the pre-trial discovery exercise connected with SCO's multibillion-dollar suit against IBM, McBride said, suggesting that the protection order has contributed to licensee confusion because of the forced lack of visibility.

SCO has been pelted with criticism for not disclosing exactly what lines of Linux code it thinks are tainted and for appearing to drag its feet and delay progress on the legal front.

McBride claimed SCO was being smeared by minions of Big Blue. IBM has brought 14 counterclaims that are "totally unrelated to the case," he said, claiming that, contrary to the story IBM was circulating, it was IBM, not SCO, that was stonewalling.

McBride cited IBM's lack of speed in producing copies of it AIX and Dynix Unix code, the touchstone of SCO's evidence of plagiarism. It took IBM a year, he said, to produce even one copy of even one version of AIX.

The occasion for the carping was SCO's second quarter. It lost $15 million, or $1.06 a share, on revenues of only $10 million, half of what they were last year. It said it's because SCOsource had come up dry. Operating losses came to $9 million and include a $682k charge for minor layoffs in its Unix unit and a $2 million charge related to impairment in goodwill and intangible assets related to its acquisition of Vultus Inc last year. SCO claimed the results were consistent with its expectations.

Its legal bills in Q2 ran to $4.4 million, about what it expects to spend this quarter too.

Until SCO gets a handle on what it can expect from its licensing efforts, it's projecting Q3 revenues of $10 million-$12 million, deriving solely from its product efforts, whose returns are also significantly depressed. McBride says that's because its Unix line has been refreshed in a dog's age- what he called SCO's "dark period" - and because it's losing out to Linux.

On the conference call to discuss the Q2 number one participant reckoned that SCO's losses to cannibalization by Linux were twice what other companies were experiencing.

To move things along, the company will be releasing UnixWare 7.1.4 this month, SCO Office Server 4.1, an Outlook-compliant e-mail widget next month, and Vitella, its single-user authentication widgetry in August. It expects to have a web services rev of Open Server aka Legend ready in Q1. The Unix unit is going to be in for "cost containment" in an effort to fulfill a promise to get it to throw off enough money to meet its expenses. McBride was vague whether that meant deeper layoffs.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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Most Recent Comments
aNonMooseCowherd 06/13/04 12:38:38 AM EDT

The interesting question is whether the SEC will wake up and investigate this as a possible stock swindle in which SCO insiders made loud noises about a case they never expected to win, in order to unload their own shares at an artificially inflated price. If that scenario is true, then the only reason for dragging out this farce is pausible deniability.

lpbbear 06/12/04 07:15:41 PM EDT

SCO is simply acting as a proxy for Microsoft. McBride hopes to be able to, in some small way, (or large) sit in the saddle of the sea change Linux represents and profit from it. He chose to be the man in the middle between the Linux community and the Microsoft interests. He has pissed off the Linux/Open Source community so badly that SCO stands no chance of ever being able to be viable as a business again if they lose their cases. If SCO were to "win" against the Linux community Microsoft would instantly turn against SCO and destroy it since it then would be the single point of attack for Microsoft to strike against in its battle for complete control of the software industry.
SCO is history no matter which way this ends up going.

InfoPoint 06/11/04 07:55:35 AM EDT

In yesterday's Conference Call in these Q2 Earnings results, McBride said:

"Linus Torvalds' proposed developer certificate of origins system validates the concerns and problems we have expressed for the past year that the linux development process has been fraught with opportunities for illegal contributions of code with minimal checks and balances. We beleive it is in part because of this unchecked process that SCO code has improperly made its way into Linux."

OwnedByTwoCats 06/11/04 07:46:34 AM EDT

It would be more awesome if IBM was awarded the only asset SCO had left, the rights to AT&T's SysV Unix, as damages in their countersuit. Or maybe those rights divided by IBM and Red Hat.

What would this do to Sun's plans to Open Source Solaris? Would IBM green-light that?

hankev 06/11/04 07:45:53 AM EDT

There was talk a year ago about SCO hoping to be bought out by IBM as a result of the suit...

Wouldn't it be awesome if, once this company is reduced to ashes, IBM were to buy them out for only a million or two (chump change for IBM). They would finally own ALL of the rights to Unix. Then, they could open-source the whole thing! THAT would be cool!