SCO's Stock Plot

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May 26, 2003 (Computerworld) -- So what do you do if you're the CEO of a $65 million software company that's losing money, losing market share and -- worst of all -- has a stock that's lost 99% of its value in the space of two years? If you're Darl McBride of The SCO Group, you file a billion-dollar lawsuit against IBM. Then drop the product you've staked your future on. Then send threatening letters to about 1,500 of your biggest potential customers. Then announce a deal with Microsoft.
Result: SCO's stock is up 500% since January. Sort of takes the mystery out of why SCO is taking wild swings at the Linux it championed just months ago, doesn't it?
We know SCO was losing money and market share and stock value, because that's all in the company's filings with the U.S. Securities and Exchange Commission. So is the statement about SCO depending on Linux to rescue the company from its declining Unix sales.
And the connection between SCO's stock price and the lawsuit, the threatening letters and the Microsoft deal? SCO's stock price jumped the day the IBM lawsuit was announced. It jumped again when SCO announced its letter-writing campaign. And again last Monday when The Wall Street Journal reported the Microsoft deal.
And every time it jumped, SCO started rattling its saber louder. If you're Darl McBride, you don't second-guess the strategy of trashing Linux to boost your stock price.
There are still a few opportunities for McBride to do that. On June 13, he'll probably announce that because IBM has breached its Unix license, SCO is canceling that license, so IBM can no longer legally sell AIX, IBM's version of Unix. That should make some headlines, and maybe add a dollar or two to the stock price.
And there will surely be plenty of publicity when SCO finally unveils to a few carefully chosen experts some carefully chosen examples of how Linux source code is riddled with copyrighted Unix code. They may not get much chance to determine exactly where any similarities in the code came from, or what they mean. But that's missing the point -- or rather, the points the event will add to the price of SCO shares.

Of course, eventually SCO will have to try to convince a judge and jury that its claims about IBM and Linux are true. But with any luck, McBride will have cashed out by then, either by selling the company or handing the mess off to some new CEO.
Does that sound cynical? Then you haven't been paying attention to SCO. When McBride was hired as SCO's new honcho a year ago, the stock was at about a dollar. McBride slashed costs, including R&D. He cut deals, mostly with other companies that, like SCO, are funded by Ray Noorda's Canopy Group. He changed the company's name to The SCO Group from Caldera. In short, he acted very much like a CEO who's sprucing his company up to be sold.
But nothing seemed to budge the stock price until SCO sued IBM in March. Success at last!
Since then, McBride has looked even more like a CEO who's gutting his company to sell it. He killed SCO's Linux -- his company's future, remember? He antagonized potential customers in mid-May by sending threatening letters to 1,500 commercial Linux users.
Today SCO may not have R&D or a future-facing product or a growing customer base. But, hey, how about that stock price!
All of which isn't good news for SCO customers. But it should be a relief to everyone else. After all, suing the people who buy software is never going to push SCO's stock price up. And as long as there's one more way to goose that stock price, Darl McBride won't be worrying about us.
Because if you're the CEO of SCO, the last thing you pay attention to is customers.
Frank Hayes, Computerworld's senior news columnist, has covered IT for more than 20 years. Contact him at frank_hayes@computerworld.com.

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