SCO's Shell Game

By Frank Hayes

July 28, 2003 12:00 PM ET

Computerworld - Trying to make sense of The SCO Group's threat last week to sue any Linux user who doesn't buy a Unix license? Forget the threat. Instead, look at the announcement SCO made the following day -- the one in which SCO said it's now in the Web services business thanks to its acquisition of Vultus Inc.
And how did SCO buy Vultus? With newly issued SCO stock, of course -- stock whose price gets a boost every time the company makes yet another wild claim about who it will sue next.
Actually, the Vultus deal is a lot more complicated than that. You wouldn't know it from what SCO said last week, but SCO has finally found a way to make money -- literally.

See our continuing coverage of SCO's Linux Battle.

View SCO coverage.

No, not from its attempts to sell Unix licenses to Linux vendors and users. Since January, when SCO started trying to get Linux types to cough up some cash, the company has sued IBM, sent threatening letters to nearly 1,500 big companies, tried to revoke IBM's license to sell Unix and threatened darkly that if someone didn't start buying Unix licenses soon, it would sue Linus Torvalds. None of that seems to have sold many Unix licenses.
But every time SCO makes a new, wilder set of legal threats, speculators bid up the price of SCO stock - starting in March, with the IBM lawsuit, then in May, when the threatening letters were sent, then again in June, when SCO tried to make IBM users pull the plug, and again last week. SCO's stock price is now about 10 times what it was six months ago.
Pretty impressive, eh? Especially for a company with no serious hope of getting cash flow from any of these threats for years.
None of the threats make legal sense. If they did, SCO would be able to get an injunction to shut down Linux users. In practice, SCO hasn't even been able to get an injunction against IBM and won't get a court hearing on its request to do that until 2005.
Meanwhile, a German court told SCO in June that it must stop threatening Linux users. And an Australian government agency is looking into charges that SCO is essentially running a shakedown racket by claiming that Linux users must buy a license they don't actually need.
And SCO's tactics don't make business sense, either. SCO is a software company that has slashed its R&D budget, alienated its customers

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