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Latest SCO News is Plain Weird

Latest SCO News is Plain Weird

  • Over 49,000 readers have enjoyed this article since Friday when it was published.
  • Read another Maureen O'Gara story from the same day: IBM Dreams of Pushing Microsoft Off the Desktop and Stomping its Clinging Fingers

    SCO CEO Darl McBride, the most hated man in the computer industry, says he's reached for an analogy to describe SCO's experience since suing IBM. "This is like...," he's said to himself, groping for an elucidating comparison, only to conclude, "Nothing...Nothing compares to what's happened in the last year."

    What happened in the last few days proves his point.

    BayStar, the venture capital outfit that wants its money back from SCO - a highly uniquely situation even for the computer business - has suddenly and out of the blue doubled its position in the company.

    The Royal Bank of Canada, which BayStar brought into the $50 million investment the pair made in SCO last fall, the investor that has reportedly never expressed doubts about the strength of SCO's position or, unlike BayStar, has never complained to SCO about its behavior, sold $20 million worth of its SCO shares to BayStar.

    And the bank is converting the rest of its preferred stock - that it paid $10 million for - into 740,740 shares of SCO common presumably to dump it on the public market. Presumably too it won't sell the stock immediately since the conversion cost it $13.50 a share, more than double what SCO's been selling for.

    BayStar and the bank's $50 million represented 17.5% of SCO.

    Neither BayStar nor the Canadian bank will discuss what happened. The bank merely calls its action a "business decision" and BayStar claims it was presented with "a strategic and financial opportunity."

    McBride claims he doesn't know any more than we do. He's had barely any contact with the bank and all he knows is that he got a letter from them last Wednesday outlining what it was doing, but not explaining why.

    McBride also claims that he doesn't know what BayStar's about either.

    BayStar hasn't withdrawn its demand that SCO return its money and BayStar's lawyers, he said, still haven't told SCO's lawyers how SCO breached their contract. So McBride figures BayStar doesn't have a legal leg to stand on and won't be able to get its money back. The money of course is paying for SCO's legal pursuits.

    McBride said he didn't know how buying the bank's shares would strengthen BayStar's position. BayStar, for instance, doesn't have a seat on SCO's board and the shares it owns are non-voting stock.

    Presumably, the shares that the Canopy Group owns - and remember, Canopy got close to $300 million out of Microsoft to settle an antitrust suit - would trump any notions BayStar might harbor about a hostile takeover.

    BayStar managing partner Larry Goldfarb, the guy responsible for the firm's investment in SCO, told the New York Times a couple of weeks ago that he wants SCO to drop its remaining Unix business, jettison its current management, husband its resources, focus on pursuing its IP claims and mind its Ps and Qs in what it says publicly.

    Apparently BayStar's lawyers have been saying the same thing to SCO's lawyers.

    One wonders whether Goldfarb taking the Times into his confidence made the bank lose its confidence in its investment, hold BayStar responsible and demand that BayStar buy it out.

    BayStar's comment about buying the bank's shares being a "financial opportunity" hints that BayStar paid less for them than the bank did.

    Goldfarb told the Times and his PR guy told us - Goldfarb was reportedly out of the country when the news broke and couldn't speak for himself - that despite his disapproval with the way SCO is run he is convinced of the legitimacy of its IP claims and of its winning its case against IBM.

    According to BayStar's Web site, Burst.com is part of its portfolio. It's unclear what the VC's position is, but Burst is the company, reduced to one or two people, that's suing Microsoft for a tidy packet. It's one of the private antitrust suits that Microsoft has yet to settle.

    Burst claims Microsoft, which it collaborated with for two years, ripped off a media transmission technology it designed to send video and audio files electronically and stuck it in Media Player 9.

    Burst has no other business outside its suit and evidently is the model BayStar wants SCO to emulate.

  • 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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