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| More From the Teleconference |
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Friday, October 17 2003 @ 04:32 PM EDT
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This is PR to the nth degree: how to mortgage your company, give up on suing SGI, and admit you can't send out invoices after all and make it sound like a plus. Here are reports from the teleconference to show you what I mean. Peter Galli of EWeek reports this interesting bit. SCO says it didn't go looking for money. Several companies, according to McBride, approached them, looking to invest: The ability to build up a "war chest" of cash was too compelling to pass up—and so The SCO Group agreed to a $50 million investment deal, announced yesterday, with investment fund BayStar Capital.
In a media and analyst teleconference Friday, CEO Darl McBride said he is pleased with the structure of the transaction, which is favorable to both the company and its shareholders. "They are non-voting convertible shares and, once converted, the investors will own 17.5 percent of the company's outstanding shares," he said.
SCO Chief Financial Officer Bob Bench said there is no timing on the conversion of the shares, which are immediately convertible and have to be redeemed in minimum batches of 100,000 common shares at a time. There is also mandatory redemption once the stock price reaches 150 percent of the transaction value or 20 consecutive trading days at that level.
"SCO also has redemption rights and after three years can redeem the stock with a liquidation preference. So we have a lot of freedom to redeem this stock if BayStar has not converted," Bench said.
No dividend will be payable on this stock for the first 12 months, but will then kick in at 8 percent and then rise by up by 2 percent for each of the next two years with a 12 percent cap. ...
McBride also pointed out that SCO did not solicit the investment deals, but was approached by several companies interested in taking an investment stake in the company. So, several companies approached them. Whoever might they be? Techweb has more details, saying SCO does intend to pursue "royalties" and will use the cash infusion to follow up, just not with invoices: Part of the proceeds would also be used in bolstering its legal battle against IBM and Linux distributor RedHat Inc., and in trying to convince enterprises to pay royalties for the use of Linux, which SCO claims contains its intellectual property. However, SCO President and Chief Executive Darl McBride listed that as the third target for the additional funds.
While SCO's claims against Linux get all the media attention, only a "small percentage" of the company is working on collecting royalties. "But clearly, there are a lot of opportunities for the company as it relates to enforcing our intellectual property rights," McBride said. "The two major operating systems in the world -- Unix and Windows -- SCO owns one of those, and having the ownership around the Unix operating system is a gigantic marketplace opportunity for us" . . . .
SCO is in the process of following up on letters sent to 1,500 enterprises this year, advising them that they may be in violation of SCO's intellectual property rights in their use of Linux. "Our goal is not to go out and start suing companies," McBride said. "But, as we go down that path, if we have certain companies out there that are using Linux and we're unable to come to a resolution or reach an impasse, then we absolutely will reserve the option of (taking) the legal path as the remedy to go resolve that" . . . .
In its suit against IBM, SCO would not refuse to discuss a negotiated settlement, but that the suit was still very much in a litigation mode. "With respect with IBM, that one is in the claims, counterclaims response mode, and we expect that in the next week or so we'll have additional things coming out on that," McBride said. Still hoping for an IBM buyout, it seems. Deutsche Bank, according to this report, is still telling you to buy SCO, putting out a second report today confirming their Tuesday buy rating, and confirming my suspicion that they likely knew about this deal in advance: In a Friday conference call outlining the announcement, an excited SCO president and CEO Darl McBride touted the financing deal as "monumental," and deflected all questions about pending litigation as "irrelevant" to the funding news. According to McBride, the financing and the lawsuits are two separate issues entirely, and with a partner such as BayStar in its corner, SCO is now prepared to tackle whatever comes its way.
"The momentum in the marketplace continues to shift in our direction," he said of his company, formerly named Caldera Systems.
"We believe we have secured the capital necessary to fund all aspects of the long-term growth of this company" . . . .
With this in mind, Deutsche Bank praised SCO on Friday with a strong "buy" rating, the same rating the investment and securities firm had delivered in a report issued earlier this week. In a new report, Deutsche Bank analysts Brian Skiba and Matthew F. Kelly reiterated the $45 stock price they projected on Tuesday, adding that with $50 million from BayStar in the bank, SCO should have the resources to overcome any litigation.
"We view this financing as a positive sign the company is increasingly equipped to take on larger challenges ahead," the authors wrote in the new report. "The funding puts to rest any concerns about sufficient cash to pursue legal challenges and ongoing investment." And
E-Commerce News says there may be acquisitions or new "strategic partnerships" as a result of this deal: BayStar Capital, whose other investments include Sirius Satellite Radio, Commerce One and Evolve Software, will provide SCO with the $50 million in cash in exchange for an approximately 17 percent stake in the software company. ...
SCO also left open the possibility that it could make acquisitions or other moves, saying the cash could pave the way for "new strategic partnerships." The investment brings SCO's total cash on hand to about $61 million." Over in England, a spokesperson for IBM says Linux is "totally unstoppable" and that IBM "shed our proprietary mindset" in 1995.
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| Authored by: Anonymous on Friday, October 17 2003 @ 04:55 PM EDT |
I wondering how much of this money is from Micrsoft?
MDW[ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 05:00 PM EDT |
After early morning rise to nearly $22 SCOX finished at $19.23, down 3.27% from
the day before. The post-teleconfernce blip up faded quickly through the
afternoon. All that glee and PR and heat and a loss for the day can't be
encouraging to the SCO management.[ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 05:00 PM EDT |
its basically a loan paid for by SCOX shares in the form of a convert.
1) it will exert downward pressure to the convert price ($17)
2) it will boost short interest (BayStar no doubt is taking short positions as a
hedge as we speak)
3) there is the small matter of the financing (8% afaik)
4) it is a preferred stock deal, meaning retail stock holder will be last in
line if/when SCO collapses.
All of this is bad news for SCOX investors - this convertible deal with BayStar
is a deal with the devil, and the smart investors are already jumping ship.[ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 05:19 PM EDT |
It's obvious who benefits from this "investment activity"- MS, SCO,
and Canopy. Now, to determine who out of the 3 companies is pulling the strings
to make these investments happen, determine who has the resources to do so.
SCO? No. Canopy? No.
MS? Yes......So as PJ said, find the links. If you can do so, it might be just
the thing to make certain govt. authorities start taking a real close look at
MS.[ Reply to This | # ]
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| Authored by: pyrite on Friday, October 17 2003 @ 05:58 PM EDT |
There is this mineral called pyrite. It can be very beautiful. It's an iron
sulfide. A friend of mine gave me a specimen - he said that some folks believed
it to be a "magic rock". It's dark black, but when you move it
around in the light it shines of all colors of the rainbow - blues, reds, golds,
oranges, it's definitely kind of cool-looking.
Pyrite can definitely be a collectible mineral in its own right, even though it
is often called "Fool's Gold", because many people have mistaken it
for gold. But don't let that stop you from collecting it, and even paying a
decent price for a nice specimen! It's definitely worth collecting, and some
specimens of pyrite are very attractive, despite the fact that they are not gold
at all.
And so it is with this System V source code. It has value. It is a good thing.
No, it's not "gold", but it has value. And that's where I think
this whole scenario has taken us... some people look at the System V source
code, and they see gold. They see world domination, incredible dreams of wealth,
and "drinks are on the house" back at the saloon.
But of course, it's not gold, and the dreams of gold will lead to nothing but
disappointment. But... the bright side of the picture is that the System V
source code is valuable, at least from a historical, educational, and
intellectual sense. Just like a nice specimen of pyrite, the System V source
code can be admired, placed on display in a museum along with other wonderful
software that can help us understand where we are today, and how we got here.
Gold, it's not.
[ Reply to This | # ]
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| Authored by: geoff lane on Friday, October 17 2003 @ 06:18 PM EDT |
Is this right.. BayStar et al give SCO $50M and in return get shares at a
discount "price". Yes?
If so, the only thing for BayStar to think about is whether to sell now for a
small profit or wait for SCO to do something really newsworthy and sell later
for a bigger profit.
Is there a grace period during which BayStar et al cannot sell the shares?
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- BayStar shares - Authored by: Anonymous on Friday, October 17 2003 @ 06:28 PM EDT
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| Authored by: geoff lane on Friday, October 17 2003 @ 06:54 PM EDT |
| Red Herring has an article
on "Death by finance:
Desperate dot-coms are
turning to a new species of loan shark -- and a funding mechanism that almost
guarantees their demise."
It's from 2001, but it seems to apply to SCO and
BayStar.
(I found the reference in /. just now.) [ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 07:34 PM EDT |
From the 8K
Microsoft is again boosting SCO's bottom line with a $8 million extension of
the licensing agreement for unspecified rights to Unix. This for the current
quarter to end Oct 31st. Hmmn. No doubt Darl will be boasting about this in a
month's time as revenue growth.
Rights to what??? Any free options included like the SUNW deal???[ Reply to This | # ]
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| Authored by: Anonymous on Friday, October 17 2003 @ 08:51 PM EDT |
"SCO says it didn't go looking for money. Several companies, according to
McBride, approached them, looking to invest:"
Yes, and the deal they just made might have been a "Toxic Convert"
as explained at http://www.bowne.com/newsletters/newsletter.asp?storyID=227 ...
basically the legal equivalent of rescuing folk from a sinking ship and then
robbing them blind before pushing them back overboard.
"Here, SCO White, have this nice shiny red apple. It will make you
rich."[ Reply to This | # ]
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| Authored by: Sunny Penguin on Friday, October 17 2003 @ 09:18 PM EDT |
Comment deleted....I self moderated here.
I will cool off more first.
Argggggggggg.
Someone call the record books,
I vote this for the biggest fish tale.
---
Vescere bracis meis.[ Reply to This | # ]
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| Authored by: Alex on Friday, October 17 2003 @ 11:10 PM EDT |
Check this out:
"McBride said there are no other "troubling" Unix vendor
issues on the horizon.
However, SCO has 6,000 Unix licensees who could be using Linux in an
infringement of its rights, and this is the area the company is now focusing on,
he said."
http://www.eweek.com/article2/0,4149,1356635,00.asp
It's on the second page at the very bottom.
Alex
---
Destroying SCO one bozon at a time[ Reply to This | # ]
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| Authored by: Hygrocybe on Friday, October 17 2003 @ 11:38 PM EDT |
After having read this latest posting and several of the comments, plus the
article at:
http://linuxtoday.com/it_management/2003101701726OPBZ
in which the editor of LinuxToday compliments PJ on her work (and I add, me too,
thoroughly...very well done)
To my perception (and I may be wrong - heavens knows I am not a financial
analyst), the current fiscal situation of SCO is as shaky as a deck of cards.
Summa: a product very few people want, a fifty million dollar debt, an income
based on legal processes and likely to be delayed for years and even then very
unlikely to succeed given all that we now know, the legal firm prosecuting the
action now hedging its bets to ensure it gets paid; and yet SCO's CEO (or
equivalent) is apparently stating that all is well and things are great because
they are going to collect additional licence fees from a limited group of SCO
UNIX users, who will want to know why they have to pay more for something they
have already licenced.
I now want to know one more thing: does the USA stock exchange monitor
situations such as this and can it take action or investigate these deals ? I
am not a legal person of any kind, but even so I cannot help but think that SCO
is now skating on very, very thin commercial ice. I guess it must be all legal
and above board but I cannot see how. If SCO's books were those of my own
home, I'd be forced to sell my house already and go into rented lodgings, if I
could afford them.
---
LamingtonNP[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 12:28 AM EDT |
It is interesting that Darl McBride is using the word "royalties"
rather than "invoices" and that he'd rather settle out of court
with the corporate end users: he is clearly trying for an end run around the
GPL. However, the SCO Group's case was weak before they got the Bay Star money
and it is still weak after they announced they got it: no change.
Yes, the extra money will enable the SCO Group to make some obnoxious move but
whatever it does will be countered either by us, IBM, RH or SGI. The SCO Group
has ambitious plans for that money. However, they will find that $50 million
does not go as far as it used to. I expect that the $45 target price that DB set
and pressure from its VC's will motivate the SCO Group down the road to execute
some recklessly aggressive action, for which we will set its butt on fire. The
SCO Group's pain is our pleasure.[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 12:44 AM EDT |
If it is argued GPL = abandoned copyright, i.e. public domain
How would this argument be countered?[ Reply to This | # ]
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- Hypothetical - Authored by: nabet on Saturday, October 18 2003 @ 01:36 AM EDT
- Hypothetical - Authored by: Anonymous on Saturday, October 18 2003 @ 04:32 PM EDT
- Hypothetical - Authored by: Steve Martin on Saturday, October 18 2003 @ 08:37 AM EDT
- Hypothetical - Authored by: Anonymous on Saturday, October 18 2003 @ 08:41 AM EDT
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| Authored by: Anonymous on Saturday, October 18 2003 @ 12:48 AM EDT |
I'm beginning to notice two things about Darl McBride. One, he never, ever
utters a complete sentence. He segues from part of a sentence to another part
of a new sentence, then back to the original repeatedly. He also has very poor
grammar. Both factors contribute a great deal toward making ANY of his comments
almost painful to read...
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| Authored by: Anonymous on Saturday, October 18 2003 @ 12:50 AM EDT |
Darl McBride claims that the SCO Group was not looking for funding, and that it
just dropped on his lap out of the blue. Lucky him: the only thing that falls on
me out of the blue are pigeon droppings. The SCO Group's relationship with the
truth was always episodic at best unless they are compelled to to tell the truth
or face the consequences.
Given the rush of investments in the SCO Group (as in "Fools rush in where
the wise fear to tread"), it seems at times that we are the only ones in
the whole world who actually read the SCO Group's SEC filings.[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 01:38 AM EDT |
"'We will provide full indemnity across the entire suite for any
SCO-related action,' said Martin Fink, HP's vice president of Linux. 'If
(customers) were to get sued by SCO,
we would take over their defense and assume liability on their behalf.'
It sounds like HP thought that its customers had "reasonable
apprehension" of being sued by SCO. This would seem to
support Red Hat's position that SCO's actions were adversely
affecting the LINUX market by causing "reasonable
apprehension" for current and potential customers.[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 02:29 AM EDT |
Just a thought: why is Chris Sontag so quiet lately? He used to be at least as
vocal as McBride. Are they already setting somebody up to take the fall (and
somebody to replace him)?[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 03:18 AM EDT |
I keep getting the feeling that the new SCO product that is said to be being
released soon, the Linux compatability stuff, has whole chunks of code used with
the copyright notices stripped off it--effectively code stolen from people
developing under the GPL.
I betcha![ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 04:17 AM EDT |
Stolen from Slashdot. A nice summary of the BayStar deal.
There are two investors; BayStar Capital is the other one, and they are an
investment house. Even if you could get a list of BayStar's investors, no doubt
those are also investment houses, and trying to track down any M$ investment
would take a lot of poking. Especially if they are private, not public,
companies ...
Look at it this way. Anyone with a brain knows that this $50M is not an
investment, because an investment expects a return on investment. You may be
able to find a few nutso small time investors who believe every press release
they see and buy stock just in case, but those people generally don't have
$50M.
The only other reason to spend $50M is to get product in return. All SCO has to
offer is its lawsuits against Linux. Now think, who would have use for such a
product? So far, two license buyers have shown up, Sun and Microsoft. Sun has
already been certified as being immune to the SCO infringement claims. Microsoft
just dumped another $8M into SCO for an enhanced license, which is just as
useless to them as the previous license purchase.
There may be no proof that Microsoft is behind the $50M, but it looks like a
pretty good first approximation.[ Reply to This | # ]
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| Authored by: Anonymous on Saturday, October 18 2003 @ 05:02 AM EDT |
In the TechWeb
article, McBride is quoted to say:
"The two major operating systems in
the world -- Unix and Windows -- SCO owns one of those, and having the ownership
around the Unix operating system is a gigantic marketplace opportunity for
us."
If SCO is able to convince investors that they have monopoly on the
second largest and fast growing OS that is around. Then I can imagine that
people want to invest in a second MicroSoft.
Hans [ Reply to This | # ]
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| Authored by: David Gerard on Saturday, October 18 2003 @ 07:05 AM EDT |
| They're not mortgaging the company - they're pawning the company. [ Reply to This | # ]
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| Authored by: geoff lane on Saturday, October 18 2003 @ 07:31 AM EDT |
| Over in The Register there is an article
about the
CEO of PalmSource has possibly been caught "talking up" the shares of
Palm.
There is a quote from the SEC...
A SEC spokesman told
us that false statements made with the intention of manipulating the share price
have formed the basis of cases in the past. "You have to prove intent," he said.
As it can only pursue civil cases, SEC needs to a show preponderance of
evidence. And that's something only an investigation can
produce.
So if you have evidence of suspect stock
manipulation, send it to SEC. [ Reply to This | # ]
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| Authored by: tcranbrook on Saturday, October 18 2003 @ 09:53 AM EDT |
http://www.linuxworld.com/story/34293.htm
A very interesting economic analysis of OSS development and use. This is
something that those investing in the dark side should think about.
"OSS continually improves because it allows new developers to stand on the
shoulders of giants. Sure, there may be cases where bad design or
decision-making lead to a step back for a particular OSS program, but for the
vast majority of cases, OSS just gets continually better as the various
developers continue to apply new code, bug fixes, and other enhancements. Even
if all the developers left a project and the project became dormant, the code
would probably still be available somewhere for download and because of that, a
new developer or team could come back in at any time and continue building on
the code base left by predecessors - starting not from scratch but standing on
the shoulders of giants as it were. This is something that is simply not done
with proprietary software without the code base being sold to a new entity - an
expensive and tortuous process.
So, on the development side, we are seeing the beginnings of what could be a
huge level of development support from business and industry and we are seeing
the traditional source of OSS development talent - the user base - continuing to
grow. An exciting time for OSS indeed."
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| Authored by: fruitcake on Monday, October 20 2003 @ 06:56 PM EDT |
| Many people are arguing that BayStar is a Microsoft sock puppet, being used to
launder donations to SCO. This may or may not be true, but either way, it
doesn't seem that Microsoft needs or desires anonymity in its support of SCO.
The recently-filed 8K (dated October 16 2003) states balls-out:
During the
quarter ended April 30, 2003, SCO entered into a licensing agreement with
Microsoft Corporation (“Microsoft”) . The initial licensing agreement allowed
Microsoft, at its election, to exercise two options to allow Microsoft to
acquire expanded licensing rights with respect to SCO’s UNIX source code.
During the quarter ended July 31, 2003, Microsoft exercised and paid for the
first of these options. During SCO’s current quarter, ending October 31,
2003, Microsoft exercised and paid $8,000,000 for the second
option.
So the question is, why would Microsoft go through the effort
of laundering donations through BayStar, when they just went ahead and gave SCO
a second direct deposit, in broad daylight, for everyone to see?
Doesn't
compute... [ Reply to This | # ]
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