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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    BayStar hasn't withdrawn its demand that SCO return its money and BayStar's lawyers, he said, still haven't told SCO's lawyers how SCO breached their contract.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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    Most Recent Comments
    J.Jeltes 05/18/04 02:42:27 AM EDT

    Hmmm... 600AD, you're doing a 180mph in a 30 zone here... You said "China couldn't invent its way out of a paper bag"; I was simply correcting that statement. About the rest of your argument... well... ehh....

    600 AD 05/18/04 12:31:49 AM EDT

    The "helicopter rotor" you wrote of was invented in 600 AD as a toy. It in no way resembles modern day airfoils. The Chinese did nothing with the design for nearly 1000 years. It wasn't until Western ingenuity in the form of Da Vinci came along that any modern day type helicopter or practical flying machines were even considered. Yes, I call that old tech. The Chinese had nothing to do with the invention of the helicopter. Your list is wrong.

    My point --- The US is the only real free democracy with a real capitalistic economic system. This combination has proven over the last 200 years to be capable of producing the richest, longest lived, most technologically advanced civilization the world has ever known. If you want proof that capitalism works look at Hong Kong vs. Main Land China. Look at the night time world map and find Korea. The dividing line between North and South is very clear. Look at Main Land China and the recent rise in economic power. It's largely due to the fact that the political situation in China has allowed a somewhat capitalistic system to form which has increased wealth and investment. The modern formulation of such ideas have come largely from the US. The US is the largest supplier of foreign aid in the world. We give billions of dollars to help many many countries all over the world. We supply friendly governments including England, Spain, Israel, Australia, and many other countries with military equipment and technology. Technology designed and built by the US and it's citizenry. The US IS the ONLY world Superpower and we are more friendly to more countries and more diverse cultures than any other country has ever been in the history of human civilization. All we ask is that your citizens don't try to plot against and murder our citizens and even then we still provide aid.

    Perhaps there will be a more benevolent superpower when the US is no more (none can last forever). But I would be very wary of others. There certainly have been less benevolent world rulers before (ex. Romans, Monguls).

    Anyhow --- China did not invent the helicopter! Perhaps you could say that God invented it --- have you ever seen a maple tree, the seeds are wonderful "helicopters".

    J.Jeltes 05/16/04 06:11:08 PM EDT

    old_tech & helicopter. This ol' Aussie bows to your superior wisdom.

    helicopter? 05/16/04 12:40:08 AM EDT

    check out this link

    and then try your invention list again. Is Leonardo Da Vinci Chinese? Maybe I'm just a dumb American!

    old_tech 05/16/04 12:32:46 AM EDT

    all those are old world items. name ONE important modern technology that China invented. Things change my friend. History is history. The US rules. Get over it. And stop whining 'cause we might just pull the funding out from under your unappreciative little behinds. The US makes your life possible!

    J.Jeltes 05/15/04 03:59:41 PM EDT

    Some Chinese inventions:
    Horse harness, wheelbarrow, plow, paper money, cast iron, helicopter rotor and propellor, the decimal system, the seismograph, matches, paper, brandy and whisky, rockets, papermaking, printing, gunpowder, bombs, compass, cannon, brain surgery, umbrella, seismograph, blast furnace, tea shredder, martial arts, porcelain, acupuncture, fireworks, boat rudder, abacus, I think that would do for starters...

    Surprised 05/15/04 03:48:20 PM EDT

    Ehhh... The Internet is based on the efforts of Charles Babbage if I'm not mistaken...His analytical engine was the first machine with the ability to store numeric programs... the computer, Internet and other "inventions" are simply an application of that technology... Babbage lived from 1791 to 1871, and was born in London, England; not the US.

    Surprised 05/15/04 03:47:37 PM EDT

    Ehhh... The Internet is based on the efforts of Charles Babbage if I'm not mistaken...His analytical engine was the first machine with the ability to store numeric programs... the computer, Internet and other "inventions" are simply an application of that technology... Babbage lived from 1791 to 1871, and was born in London, England; not the US.

    america_did_not_invent_everything_important_in_the_last_hund 05/15/04 02:25:07 AM EDT

    Comments like that are why a large portion of the world hates america and everyhting it stands for. Read some history you biggoted idiot.

    Snowlock 05/15/04 12:02:57 AM EDT

    [I]A country which exports lawyers like the US or a country that exports products like China?[/I]

    What the hell are you talking about? China couldn't invent its way out of a paper bag. All of those wonderful products you are talking about were MADE by the USA. We merely outsource the manufacturing. If US companies chose to pull out, SE Asia would be back in the economic hinterland that it once was akin to upper mongolia. Get your facts straight and stop with your false nationalism. For better or worse the US has invented nearly every major advancement in the last century.
    China has rice. Go back to that and stay off the internet. You know.. that thing that the US invented.

    snrargf 05/14/04 11:52:39 PM EDT

    Could someone please provide a diagram of all these legal actions, financing and directorship control please? Its all so very confusing.

    sk43 05/14/04 10:48:33 PM EDT

    My guess is that McBride is history. Otherwise, why is he so much in the dark? Enjoy his antics while you can. If I was in Baystar's shoes I'd be talking hardball with the board of directors. Baystar's entire motive for its purchase of RBC's shares was to build up clout. Baystar clearly thinks that this case is salvagable. If I were IBM, I would want to know the details of the transaction between RBC and Baystar to determine if it was kosher or if some under-the-table action happened.

    Anomaly 05/14/04 10:05:50 PM EDT

    You can't say "highly unique". Either something is unique or it is not. There are no half measures.

    Reid 05/14/04 06:36:04 PM EDT

    Humm... SCO sucks, but...

    From my understanding of the situation, Burst has a REALLY, REALLY strong suit against MS. Search Cringely's archives on Burst. SCO, on the other hand, doesn't have so much as a stub of a leg to stand on.

    Anonymous Bragger 05/14/04 05:50:12 PM EDT

    Hackus: Good one!

    I wouldn't say that America or any other country is unable to innovate, but I can say that the legal and economic pressures put on companies makes innovation so much harder.

    The US has put up a large barrier in front of emerging markets that threaten them forcing them into trade, copyright, etc.. treaties to limit the foreign companies' abilities to compete purely by innovation.

    Now China comes around. They're stubborn, growing, and have the potential talent to pull off a real economic shift. Now, what will the states do to fight the backlash. That alone is the most important issue. If both markets continue as they are today, expect some blood letting.

    Anon 05/14/04 05:15:01 PM EDT

    I'm guessing that Baystar is buying the stock to control the assets of SCO in liquidation. They'll allow/force SCO under, then take over the company directly, focusing on the legal case. Other articles made clear that that was the value they saw in the investment - since it's getting "mishandled", they'll do it themselves if they need to.

    Hackus 05/14/04 05:11:27 PM EDT

    The whole idea of having a company to do lawsuits as a business model is something only American companies do.

    Innovation, and high technology is something the Far East does.

    Mmmmm, wonder which country will be the new economic AND military power of the 21st century?

    A country which exports lawyers like the US or a country that exports products like China?

    You know products, like most of those 1 Terabyte Seagates you have in your servers....


    Arnt Karlsen 05/14/04 04:40:21 PM EDT

    ..uh, is Microsoft screwing BayStar, too???

    linuxbert 05/14/04 03:59:10 PM EDT

    Does this sound familiar?

    From the Article:
    "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."

    hasn't this been just hat SCO is doing to IBM - Not telling them anything...?

    justforaday 05/14/04 03:57:06 PM EDT

    It's just a misinterpretation.

    See, it's where you place the punctuation. What he's really saying is "This is, like, nothing" meaning that to him and SCO, the BayStar thing doesn't have any affect at all. Or, at least I'm sure that's how SCO will try to spin this...

    Ghengis 05/14/04 03:47:13 PM EDT

    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.

    That has to be one of the worst sentences I've read in a news article. I know it's still gramatically correct, but talk about hard to follow! Sure it may be off-topic, but WOW! It looks as if anyone can be a writer these days.

    English Lessons Needed 05/14/04 03:45:55 PM EDT

    Wow... This is probably the most poorly-written article I've read in a long time... Are there any Linux users out there who've taken a journalism class?

    I'll try reading this article again when it's posted in English.

    fresont 05/14/04 03:44:45 PM EDT

    Could the author of this article please proof read it and resubmit it? How could something with so many errors get published like this?

    SCOX-strong sell 05/14/04 03:34:23 PM EDT

    It's true, check this out since this AM

    stockwatcher 05/14/04 03:31:34 PM EDT

    check out nasdaq.com, scox is a strong seller, while IBM even with the nice high stock price is marked as a good buy.
    sco is over.

    $$$$ 05/14/04 03:29:14 PM EDT

    RBC is in bed with IBM ! I used to work IT there and I can tell you that I don't think they'll ever migrate from big Windows versions anymore... Longhorn is not gonna happen at RBC after the problems they had switching from NT4 to W2k..

    anonymOus 05/14/04 03:26:52 PM EDT

    Smartest thing Darl's ever done.

    Andy Green 05/14/04 01:37:07 PM EDT

    It's not such a surprise that McNugget's limited imagination fails him when he tries to simplifiy the tale of his idiotic journey to riches - ~$1M salary this year from a $70M capitalized company for his "home on the ranch homilies"... thanks to the generous, loving SCOX shareholders.

    Ya know, I always read that predators have their eyes close togther, to focus on their prey, and prey have their eyes widely spaced apart, like pigeons. Look at Darl. Where do you think he fits in?

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