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LinuxWorld: Why the Linux Community Needs Open Source Insurance

Mar 20, 2004, 00:15 (6 Talkback[s])
(Other stories by Daniel Egger)

[ Thanks to Jason Greenwood for this link. ]

"Last year, after 10 years of almost unbelievably rapid adoption, two new things happened: Linux distributions began to dominate the commercially vital 'Post-PC' market for embedded devices; and massive clusters of inexpensive Intel boxes running Linux became a viable way for huge IT-dependent enterprises to run applications from Oracle, SAP, and others, as well as their own custom applications, while saving tens or even hundreds of millions of dollars in direct and indirect hardware and software costs. Providing Linux-related services to corporate clients was a $3 billion opportunity last year - but the explosion of Linux at both the device and enterprise levels now suggests it may well prove to be a $50 billion bonanza within 10 years.

"In America, whenever so many billions of dollars get involved, companies under pressure hire lawyers and begin suing each other. Why? Because litigation works well enough, often enough, to get plaintiffs' lawyers excited. For example, before it sued IBM for $3 billion and began claiming publicly that intellectual property it owns got incorporated illegally into the Linux kernel, the SCO Group was a mangy dog of NASDAQ, with a market capitalization of under $25 million, a collapsing business model, and financial statements that suggested it might be a few quarters away from a Chapter 11 filing. Within months of hiring an outstanding litigator, David Boies (best known for humiliating Microsoft in the Justice Department's antitrust case) and hatching a new business plan based on challenging the provenance of the Linux kernel in court proceedings and in public statements, SCO was able to collect over $12 million in new license fees from Microsoft (no hard feelings, David) and Sun, raise over $50 million in new cash from undisclosed equity investors, and see its stock price rise from a low of $1.30 to more than $15 per share, giving it a market capitalization of more than $200 million. Although insiders sold more than $4 million worth of their own stock, an analyst at Deutsche Bank put out a 'buy' recommendation and a price target of $25 per share. All this bullishness while the vast majority of journalists and legal analysts who have studied SCO's legal claims find them generally unsupported, at least by the evidence SCO has made public to date..."

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