SCO chief swears company would survive legal fallout
McBride: bullish or full of bull?
By China Martens, IDG News Service | Published: 09:05, 09 August 2005
The SCO Group have a viable business even if it loses the titanic courtroom battles if has taken on, CEO Darl McBride has sworn just prior to his company's reseller forum in Las Vegas.
SCO's Unix business is profitable and the company is due to shed its heavy financial burden from legal fees from January 2006, McBride railed. "When we started this and people asked me that question," I said, 'As a company, we're screwed'.Today, I don't believe that to be the case. We've got a cap on our legal expenses and our Unix business is profitable. If you put that together, you've got long-term sustainability."
By January 2006, SCO will have spent close to $40 million in legal fees, according to McBride. However, once the company has made its January payment, it will then have paid in full for legal services "in perpetuity", he said. At that point, SCO's balance sheet will no longer be weighed down by legal expenses.
Back in August 2004, SCO announced it had worked out a deal with its lawyers to cap the company's legal costs at $31 million. Such costs have stems from it taking out lawsuits against Novell, IBM, AutoZone and DaimlerChrysler all claiming one thing: that it has intellectual property rights over open-source operating system Linux.
In its slander of title lawsuit filed against Novell in January 2004, SCO argues that it owns the rights to the Unix and UnixWare copyrights and is seeking damages from what it claims are Novell's false representations about owning the operating systems' source code. SCO's claim on the Unix source code forms the basis of its lawsuit against IBM.
It has then accused Daimler Chrysler and AutoZone of violating their Unix software agreements with SCO.
And finally Red Hat is suing SCO for allegations relating to its Linux claims, including trade libel and deceptive practices - but the judge in that suit has stayed that case pending the outcome of SCO's IBM lawsuit.
McBride refused to comment specifically on SCO's ongoing legal cases, but did fire back against Novell's recent filing where the company suggested SCO is fast running out of money. "It's a little bit of a tennis match," he said. "Novell has tried to dismiss the case twice." Using a baseball analogy, he continued: "Novell's two strikes already on the last two attempts, now they seem to be swinging wildly." SCO's attorneys will be responding soon to Novell's filing, he said.
"I don’t spend a lot of time worrying about it [the litigation]," McBride claimed. "If it takes a year or 10 years, we’ll have our day in court when we get there." McBride insisted that within SCO, the vast majority of its employees are focused on the company's technology, not its legal tussles.
One expert who has watched the developments in SCO's litigation is long-time legal advocate for the free software movement Eben Moglen, chair of the Software Freedom Law Center and a professor of law and legal history at Columbia University Law School.
"I feel like a broken record - from first to last, I've never had to change," Moglen said. "SCO's bluffing, whistling up the wind. They ruined a company that had a business and customers that cared. It was a vulgar and selfish thing that has no basis in law and no basis in fact. It's clear to everyone that the whole thing's a sham and a failure."
How do SCO customers react to the continuing litigation? "They’re with us because of our products, they like to get a basic update [on the legal situation], then move back to talking about new innovation," SCO's McBride said. "Generally speaking, our customers are very loyal, some even wish us good luck. It's interesting how supportive they’ve been to this process."
Another message McBride has for SCO Forum attendees is about the company's recent financial performance. "Over the last five quarters, you see our loss continuing to narrow by a couple of million dollars," he said.
McBride also maintains that SCO has yet to realise revenue gains from the latest release of its OpenServer operating system, debuted in June. McBride estimates that SCO garners 60 percent plus of its revenue from OpenServer, with the remainder coming from its UnixWare operating system.
While he agrees OpenServer is good solid technology, Dan Kusnetzky, vice president of IDC's system software research believes that SCO faces another issue. "The challenge for the company is getting their message heard," he said. "SCO's being overwhelmed by all the noise coming from Redmond and from the Linux community. They're getting squeezed by Windows on the one side and by Linux on the other."
In his discussions with customers, SCO is almost never mentioned, a different situation from two years back when users were still name-checking the company, according to Kusnetzky. "The overall impression is that in spite of their efforts, SCO is slipping off the radar screen," he said.