Caldera's acquisition of SCO's Unix business gets mixed reviews

Caldera Systems Inc.'s acquisition of the Unix server and services businesses of The Santa Cruz Operation Inc. (SCO) gives Caldera access to a large installed base of users and a strong distribution channel. But doubts are emerging on whether Caldera can successfully merge open source and proprietary product lines without betraying its roots in the Linux community.

"I'm very skeptical about this deal," said Stacey Quandt, an analyst at Giga Information Group Inc. in Santa Clara, Calif. "They can't [release UnixWare] under the General Public License because there are probably parts of code that belong to third parties. They are walking a thin line between open source and a proprietary operating system."

Caldera, based in Orem, Utah, said it would meld its product lines with SCO's into what it calls an Open Internet Platform that will scale from thin clients to the data center. On the high end of the market, it is counting on UnixWare, the 32-bit Unix-for-Intel platforms it is acquiring from SCO. UnixWare has already been adapted by SCO to run Linux binaries.

In a conference call with analysts, Caldera CEO Ransom Love said it isn't yet clear under what type of license the SCO technologies will be released. He said developers would get access to source code but that Caldera would hold on to ownership of some of the code. "Ownership [of code] is not a bad thing; it's actually a good thing," said Love. "It protects [code] quality."

Caldera's statements about its plans for the UnixWare code resemble Sun Microsystems Inc.'s Solaris policy, said Quandt. Analysts are also doubtful on whether Caldera will be able to take over SCO's role as a key partner of IBM in Project Monterey, a joint effort to develop a Unix version for Intel's IA-64 architecture. "There's no guarantee IBM has to accept Caldera as a member of Project Monterey," said Quandt.

An IBM spokeswoman said the company already has a tight relationship with Caldera and that the relationship will continue. "How this impacts AIX and Monterey has yet to be determined," she said.

One SCO UnixWare user, information systems manager Tom Pratt at Coastal Transportation Inc. in Seattle, said he is relieved by the deal. "I didn't know how long [SCO] was going to be in business," said Pratt. UnixWare "is a good operating system, and I depend on it a lot more than I do on Linux," said Pratt. He said the acquisition would make him more likely to turn to Caldera OpenLinux rather than another Linux version.

Under the deal announced yesterday, SCO will receive a 28% ownership stake in Caldera and $7 million in cash. In addition, Orem-based The Canopy Group Inc., a major stockholder of Caldera, will loan $18 million to SCO, which will keep its Tarantella software division and the SCO OpenServer product line. The deal is expected to be completed by October.

"This is going to have to be executed extremely well," cautioned George Weiss, an analyst at Stamford, Conn.-based Gartner Group Inc. "I think there are practical migration problems for [UnixWare] VARs and users that weren't addressed and won't be addressed for some months."

Weiss also said SCO's UnixWare may not be the ideal Unix version to fulfill Ransom Love's vision of a platform that scales to the data center because SCO's customer base is mainly in small and medium-size businesses.

Analysts also pointed out that, unlike IBM or Compaq Computer Corp., Caldera cannot offer customers an integrated software and hardware solution.

The sale follows two straight quarters of losses by SCO, which last month announced that it had signed on an investment banking firm to help evaluate its options in light of its financial problems (see story).

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