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Editor's Note: Is BayStar SCO's Bully or Savior?

May 07, 2004, 23:30 (25 Talkback[s])
(Other stories by Brian Proffitt)


Desktop-as-a-Service Designed for Any Cloud ? Nutanix Frame

By Brian Proffitt
Managing Editor

Quick poll: hands up if you at least chuckled at the news that BayStar was going to pull out $20 million of their investment in The SCO Group. Sure, I've got my hand up. As a sideline watcher of the events surrounding the Linden, Utah company, I too thought it was a huge dose of karma being laid down upon Darl and Co.

And how about this one: did today's news about the Royal Bank of Canada's massive stock conversion tickle your fancy?

Okay, so how many thought it was funny when BayStar told us why they were going to withdraw their investment? That they needed to focus more on litigation and less on their software product line?

See, that's when I stopped laughing.

BayStar's demands, on the surface, may have seemed like playground comeuppance--the kind you may have relished as a kid, when you could say "Gee Butch, I don't think you'll be bothering me any more. Meet my friend much taller and stronger friend Biff." The playground bully, it seems, was getting bullyed themselves.

At the time, SCO immediately squawked and said they did not agree with BayStar's demands--but they were continuing to negotiate. Some in the community said that Darl's own ego would be his downfall and they would never capitulate. The SCO stock plummeted with the news, and many started polishing their best dancing shoes to perform a jig on the grave of SCO.

But something has happened since the BayStar threat that really raised my concern level.

Then SCO confirmed that it had made some layoffs recently. They made this announcement quietly, which is a bit odd, because I know some public companies can get a stock boost from those investors that look at layoffs as just another cost-cutting move that will (in pure business terms) improve the company's bottom line.

Still, given the amount of negative press the company has been bombarded with over the last 15 months, one could hardly blame SCO for keeping the layoffs quiet.

When the layoffs were announced, many people started lacing up those grave-dancing shoes. But I would submit that anyone who thinks that SCO is about to go to the great beyond should hold off celebrating (or mourning, as the case may be).

Layoffs, for me, are never happy things to report. Even if I dislike a company or what it stands for, it is always troublesome that the people who do the majority of the day-to-day work at a company are the first to get penalized for the decisions that the corporate exectutives made in the first place. Executives who rarely take paycuts to help save the company's bottom line, mind you.

And losing a job is always a stressful event, with chaos and struggle that I really would not like to wish on anyone. So I hope the employees laid off from SCO do well in their search for new work.

That said, I think the layoffs are a sign that SCO may indeed be listening to BayStar's demands after all.

SCO has stated that the layoffs were needed to help that all-important bottom line and to improve their ability to get their UNIX product line out. I believe the first part of the statement, but I am having trouble buying the second part. BayStar wants SCO to become an IP litigation company. You don't need a lot of staff and overhead for that.

And, please note: BayStar has not actually said it has pulled that money out. They just warned SCO that they would if their concerns were not addressed. Thus far, no action has been taken. I believe the layoffs were the first sign that SCO is going to try its hardest to meet BayStar's demands.

I see a second pattern emerging these days as well: the level of rhetoric from Linden has plummeted to almost nothing these days. Miss Darl McBride's inflammatory statements? You can bet BayStar won't miss them.

So, who cares? After all, BayStar's bullying of SCO is a fun sight to behold. SCO's demise is a good thing, right?

See, here's what I'm thinking: no, it's not.

Because if what I fear is true, a transformation of SCO into a pure litigation firm is the exact thing Linux does not need. With little to no overhead, a pure SCOSource-only company coould just live the rest of its days as a clearinghouse for all the alleged patent violations it could find. It could sue past customers for breach of contracts. It could tie up litigation for years.

Of course, there's always a chance that SCO will ultimately reject BayStar's plans. But since it is the duty of SCO's officers to generate more money for the company's stockholders, they may have to take the money being offered.

Today's Royal Bank conversion of SCO preferred stock may also indicate that both companies are looking to just get out of SCO's business altogether. Time will tell what the overall plan will be. BayStar holds the big SCO investment cards now.

Can Linux survive this? Of course it can. But the pesky SCO mosquito will have morphed into a nasty leech. It's still not life-threatening, but it's much harder to detach.

As I said, I would not laugh at layoffs as a matter of principle. But I don't think even the most hardened and jaded SCO protester should laugh, either. Because, to me, this reduction in force is just SCO sharpening its teeth to sink further into Linux.