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Buybacks and More on BayStar
Thursday, March 11 2004 @ 05:42 PM EST

Newsforge continues its investigation into the BayStar deal. It seems Mr. Anderer is nowhere to be found:

"S2, the Mike Anderer ('Halloween X') company that is suspected of brokering the big transaction for SCO Group, has all but disappeared from the face of the Earth. Its Utah business license has expired, its Web site is dead, and no one seems to know where Anderer is located. S2 had an office in Redmond, Wash. that now appears to have morphed into another company we discussed on Tuesday called Entirenet. S2 also had offices listed in Salt Lake City, Columbia, S.C., Royal Oak, Mich., and Charleston, S.C. until recently. All the phones are now dead except for the one in Michigan, which now belongs to another company that has no idea who S2 is -- or was."

Hmm. Curiouser and curioser. NewsForge emailed Mr. Anderer using an address SCO provided, but they got no reply and they publicly ask him to contact them.

Peter Galli, who was on the BayStar story back in October, has a thorough piece today also. Here's what he found out:

"BayStar, which is based in Larkspur, Calif., and has investments in other hardware and software companies including Neoware Inc., Roxio Inc., Commerce One Inc. and Neoware Inc., structured its $50 million investment in SCO as a private placement of non-voting Series A Convertible Preferred Shares.

"These shares are convertible into common equity at a fixed conversion price of $16.93 per share—the average closing bid price for the company's common stock for the five trading days prior to and including the date of closing.

"Once converted, BayStar will own an aggregate of approximately 2.95 million shares of SCO common stock or 17.5 percent of the company's outstanding shares. . . .

"'Yes, Microsoft did introduce SCO to BayStar as a possible investment opportunity, but I need to reiterate that Microsoft did not participate in the SCO investment and is also not a participant or investor, either directly or indirectly, in BayStar,' McGrath told eWEEK on Thursday.

"McGrath declined to speculate on why Microsoft might have wanted to point BayStar towards SCO as a possible investment, saying 'you'd have to ask Microsoft that
.'"

MS's mantra remains the same, they have "no direct or indirect financial relationship with BayStar." OK, what about EV1? Galli goes into some detail about that too:

"Asked about the relationship between Microsoft, EV1Servers.Net and SCO, Microsoft spokesman Martin would only say that 'Microsoft had no involvement in the EV1 and SCO relationship. Microsoft is pleased to call EV1 a customer and an industry partner. However their dealings with other companies are their own.'"

Of course, it was MS who told us for months that they had no involvement in the BayStar PIPE at all, as Galli points out. Newsforge thought to inquire directly if Microsoft had any involvement through the Royal Bank of Canada:

"When asked Thursday if Microsoft or any of its divisions had any input into the Royal Bank of Canada portion of the PIPE deal, Microsoft spokesman Martin told NewsForge that 'Microsoft had no involvement in that matter.'"

Now, about the buyback, the question is why. SCO's answer is that they are doing it to show their confidence in their stock:

"'This action reflects our strong belief in the fundamental value of our intellectual property and core business,' said SCO chairman of the board Ralph Yarro. 'At current prices, we believe our stock represents an attractive investment opportunity and that this action reflects our ongoing commitment to improving long-term stockholder value.'"

Could be. If you are interested in knowing why companies do buybacks, as I was, you'll find that is indeed one reason why companies do buybacks.

Bain & Company's Darrell Rigby, a Director at Bain & Company, a Boston-based global business consulting firm, has an article that explains buybacks, and they say companies do it for several possible reasons:

"Companies typically use Stock Buybacks to reduce dilution of their earnings. When a company buys back its own shares, it reduces the amount of stock in circulation. Future profits then are spread across fewer shares, potentially increasing a company’s earnings per share and the value of its stock. . . . Private trades allow a firm to buy out unwanted shareholders, self-tenders provide a method for repurchasing larger amounts of stock, and accelerated purchases allow a firm to immediately recognize the financial impact of the program. If successful, Stock Buybacks provide a more taxefficient method of profit distribution to shareholders, as capital gains are often taxed at lower rates than dividend income. Additionally, Buybacks are less binding to a company in the long run—they do not require SEC disclosure and can be scaled back under much less analyst scrutiny than a dividend reduction. . . .

"Companies use Stock Buybacks to:

  • Build investor confidence and shareholder loyalty;
  • Increase earnings per share and return on equity;
  • Obtain company assets at bargain values;
  • Boost share price by signaling that the stock is undervalued;
  • Increase the company’s debt-equity ratio through shifts in financing structure;
  • Offset dilution effects that are caused by the exercising of employee stock options."

There is also a research paper, "When a BuyBack isn't a Buyback." You can get the PDF on this page, or as HTML here. Finally, BusinessWeek did a report on buybacksback in 2002, "The Buyback Boomerang":

"Some critics believe the buyback frenzy was nothing more than executives seeking to maximize their own wealth. 'They boost the price in the short term and then sell their shares,' says Kathleen M. Kahle, a University of Pittsburgh finance professor and author of the February, 2002, study When a Buyback Isn't a Buyback. Kahle found that the higher the percent of in-the-money options held by top brass, the more likely the company was to execute a buyback plan. The cycle of issuing options--and offsetting shares once options were exercised--pushed share prices ever higher and fed the stock market bubble. . . .

"In the '80s and '90s, the mere announcement of a buyback would give a stock a 3% to 4% pop without spending a cent. Now, such signaling is likely to backfire, says Merrill's Plohn. Companies that announce a buyback but never follow through on it risk creating a credibility problem with investors. 'It looks like you were just trying to hype the price of the stock,' says Plohn.

"Investors must realize that they can't take buybacks at face value. Many repurchases have been little more than costly attempts to jack up share prices and enrich execs. Ultimately, the only reliable driver for share prices is profits."

If the hope was to inspire confidence, The Register says it hasn't worked so far. TheStreet.com puts its spin on it. And TechWeb adds:

"To date, SCO's legal challenges have failed to bring much financial gain. The company reported a net loss of $2.3 million in the first quarter ended Jan. 31 on declining revenues of $11.4 million. Only $20,000 came from its Linux licensing initiative.

"While there is no evidence Microsoft is bankrolling SCO's legal battles, there's little doubt as to Linux's growing strength in the market for servers, which are computers used to run business software.

"Unit shipments of Linux servers increased 52.5 percent in the fourth quarter of 2003, compared to the same period the prior year; and revenue from the operating system jumped 63.1 percent to $960 million, according to International Data Corp. Unit shipments and revenue from Windows servers also increased."

And just so we can follow the bouncing ball in this never-boring story, here are some urls from the past on the BayStar deal:

You'll recall this story from December on the revised terms:

"The agreement between the software maker and its lawyers for the high contingency fees has raised many eyebrows in the banking and high-tech industries.

"The filing stated that SCO cannot be sold 'without first obtaining the consent of the private placement investors holding at least two thirds of the shares of SCO's outstanding Series A Convertible Preferred Stock.'

"The filing explained that 'SCO's agreement with the law firms provides that the law firms will receive a contingency fee of 20 per cent of the proceeds from specified events related to the protection of SCO's intellectual property rights. These events include settlements, judgments, licensing fees, subject to certain exceptions, or a sale of our company during the pendancy of litigation or through settlement, subject to agreed upon credits for amounts received as discounted hourly fees and unused retainer fees and may include issuances of SCO equity securities.'

"According to a filing Monday by the SCO Group, RBC and BayStar now have veto power over any SCO action that would trigger the 20-per-cent payment to SCO's attorneys at Boies, Schiller & Flexner LLP."

UPDATE:

Bob Mims of the Salt Lake Tribune dangles another possible motive for the buyback in front of us:

"SCO parent Canopy Group, and its CEO Yarro, together own nearly 11 million, or 76 percent of SCO common shares, according to the U.S. Securities and Exchange Commission. Knowing that, Jenson speculated the buyout could be a precursor to taking SCO private."

Going private would, of course, mean no more SEC filings would be required. Can that 76% figure really be accurate?


  


Buybacks and More on BayStar | 348 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Buybacks and More on BayStar
Authored by: Anonymous on Thursday, March 11 2004 @ 09:51 PM EST
Looks like it was effective for a few hours thei morning. Tomorow should tell if
the SCO FUD Mojo is still working.

[ Reply to This | # ]

Anderer, where are you.
Authored by: jerm on Thursday, March 11 2004 @ 09:58 PM EST
Mr. Anderer would do Darl and friends a big favor and surface right now if
everything was on the up-and-up. If things were not on the up-and-up, he'll
stay out of sight.

I can't wait to see how this plays out. It's better than celebrity poker.

jerm

---
Real programmers don't comment their code. If it was hard to write, it should
be hard to understand.

[ Reply to This | # ]

Buybacks and More on BayStar
Authored by: Anonymous on Thursday, March 11 2004 @ 10:05 PM EST
Can they use the buyback to buy the shares if BayStar decided to convert the
note to shares? This way BayStar can probably get a lot more than selling the
shares in open market.

SCO obviously is in no shape to repay the note, and that may be a way out for
BayStar with limited loss.

Another point that I find it puzzling about the buyback. Company ususally do
that when they have lots of cash. SCO do have a fair amount of cash, but they
also have a very large legal bill. Buying back shares is going to hurt their
liquidity, and reduce the amount of time they can afford to fight this battle.



[ Reply to This | # ]

My conjecture - from whom do they buy?
Authored by: freeio on Thursday, March 11 2004 @ 10:07 PM EST
This sort of a buyback arrangement would be a reasonable way to make
pre-arranged stock purchases from the big holders (i.e. insiders) and thus to
transfer money from the company directly to these individuals/entities. Doing
so quickly would meet their stated criteria. There is nothing about a buy-back
arrangement that says that the open market would be the method used.

If the company is seen (internally) as having a limited future, then legal
transfers of cash from the company to large investors would "save"
that from the certain loss which would come with bankruptcy. The small
investors can be safely left holding the bag, as is the case with any real con
job.



---
Tux et bona et fortuna est.

[ Reply to This | # ]

Dividend and buyback restrictions
Authored by: Anonymous on Thursday, March 11 2004 @ 10:20 PM EST

Here is the Groklaw story that compared Series A and Series A-1.

You should notice there is a crucial restriction on the company that prevents it from issuing dividends or buying back stock.

... the Corporation shall not take any of the following corporate actions ...

(v) redeem, repurchase or otherwise acquire, or declare or pay any cash dividend or distribution on, any Junior Securities. Notwithstanding the foregoing, the Corporation shall, without the prior approval of the Majority Holders, be entitled to repurchase Junior Securities from employees of the Corporation in connection with employee compensation plans approved by the Corporation's Board of Directors;

So either BayStar/RBC approves of a general buyback, or this is intended only for SCO employee's and officers. The 1.5 million figure of the buyback program exactly matches the amount set aside and registered for SCO's employee incentive plan. Be aware that BS&F received 400K shares under this employee incentive plan.

Digging done by many posters to the Yahoo! Finance stock board. Thanks so much.

[ Reply to This | # ]

typo
Authored by: Anonymous on Thursday, March 11 2004 @ 10:22 PM EST
s/curioser/curiouser/gi

[ Reply to This | # ]

M$ and BayStar
Authored by: Anonymous on Thursday, March 11 2004 @ 10:27 PM EST
A lot of people are commenting on the new admission by BayStar that M$ suggested BayStar invest in SCO. They seem to think that M$ will get into trouble over this. But an article on C|Net asked a lawyer about that. Here's what the article says:

Helping SCO find funding may in fact advance Microsoft goals that are anticompetitive, but it isn't necessarily a basis for a lawsuit under the Sherman Antitrust Act, said Andy Gavil, an antitrust expert at the Howard University School of Law. The reason: Filing lawsuits is protected under the First Amendment. "There are many examples of firms funding somebody else to sue their rivals. Sure, their underlying goals are anticompetitive, but they're exercising First Amendment rights in filing lawsuits," Gavil said. "Even if the goal is to squelch competition, as it frequently is in patent and copyright cases, it can't be a violation of the Sherman Act if all you're doing is exercising your valid right to initiate litigation."

And it goes on to say:

"The Microsoft settlement with the DOJ does not cover something like this. It dealt with commitments about interoperability and dealings with OEMs," Donovan said, referring to original equipment manufacturers, a term for computer makers. "There was no broad provision that said (Microsoft) shouldn't do anything else to harm other operating system owners or providers."

So, even if all this is true, what difference does it make?

[ Reply to This | # ]

Buybacks and Liquidity
Authored by: MyPersonalOpinio on Thursday, March 11 2004 @ 10:34 PM EST

There is a rather nasty possibility for the buyback (from a SCOX short perspective). Given the apparent extremely low availability for SCOX stock, they may attempt to produce a short squeeze (a.k.a. cornering the short market)

From the SCOX float numbers as reported in yahoo finance, there shouldn't be availability problems (e.g., the Motley Fool indicates that availability squeezes may occur when short/float is above 50% and SCOX is not quite there yet). In the yahoo message boards a few people have mentioned getting recall notices, even when this ratio was much lower. These recalls indicate that the low availability is real. Maybe the float figures are missing something?. I checked the NASDAQ definitions for float (notice that not meeting a minimum float cold cause a stock to be delisted although SCOX seems to still have some wiggle room, even if the buyback is executed fully). When an individual or institution has more than 10% ownership in a company their portion it is no longer considered public float. Insider ownership is not public float either. Maybe the mutual funds are not holding more than 10% and their portion is considered public float even though they may not make their shares available for borrowing?

Short squeezes done on purpose are conspiracies to alter the price of securities (and the SEC has punished in the past manipulators doing short squeezes on purpose) but they may be quite difficult to prove. I hope that SCOX has too many eyeballs on them and in this case it won't be that easy.

[ Reply to This | # ]

Buybacks == Stockholder Confidence
Authored by: moogy on Thursday, March 11 2004 @ 10:36 PM EST
Buyback programs for some of the reasons stated above
can make sense in some situations.

SCOG has seriously dwindling revenue streams. Despite the
license "sales" shows losses. And knowingly looks forward to
at least two more years of legal battles just with the
cases they currently have and say there will be plenty more
cases filed.

So where is the money coming from to make these buybacks?
It looks to me likes it's the money they got from their
investors, the previous stock sales, that is being used
to buy their own common stocks.

This is supposed to generate confidence in the company
and it's leadership?

That's incredible, as in not credible.


---
Mike Tuxford - irc.fdfnet.net #Groklaw
First they ignore you, then they laugh at you,
then they fight you, then you win. --Gandhi

[ Reply to This | # ]

The Looming Registration Deadline
Authored by: Anonymous on Thursday, March 11 2004 @ 10:47 PM EST

There is a very important deadline upcoming that is little reported. Look at the filings for SCO on SEC's Edgar. On 2003-11-17 you see a form S-3 registration statement for the common stock shares to which BayStar/RBC can convert. On 2004-01-16 you see an S-3/A which is an amended version of the same. Finally on 2004-02-11 there is yet another S-3/A. These filings are required by the agreement between SCO and BayStar/RBC so that when they elect or are forced to convert, there will be common shares available for them. A Groklaw article has previously contrasted the changes in the amended proposed registration statements. No prospectus has yet appeared, and this suggests the SEC has not yet approved the registration statement, and it has not become effective. The agreement between SCO and BayStar/RBC has specific language about deadlines by which the registration must be become effective, lest a redemption event be declared.

The "Registration Deadline" means (i) the ninetieth (90th) day following the date hereof if the Registration Statement receives a "no review" from the SEC; (ii) the one hundred thirty-seventh (137th) day following the date hereof if the Registration Statement is reviewed by the SEC; or, (iii) the one hundred fiftieth (150th) day following the date hereof if, in connection with reviewing the Registration Statement, the SEC also reviews the Company's filings with the SEC pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "Exchange Act").

The 150th day is this coming Sunday. Unless the registration is approved tomorrow and a prospectus appears, BayStar/RBC will be entitled to demand back $60M in cash from SCO. That amount may be more than SCO currently has and could bankrupt SCO. Of course, if we are wrong about this situation, or SCO and its preferred shareholders negotiate an extension, or the preferred shareholders elect not to exercise their redemption with penalty option, then nothing will happen.

But this is a very uncertain situation, and it makes it look like the SCO share buyback program could drain the company's money to purchase shares from the employee stock option program just when the preferred shareholders will be demanding money back.

Again, check this information yourself and verify against the documents and the opinions of experts.

Information was collected and research by posters to the Yahoo! Finance board. Thanks!

[ Reply to This | # ]

Havn't You Geeks Heard of Put Options?
Authored by: Anonymous on Thursday, March 11 2004 @ 11:04 PM EST
I'll bet a certain part of my anatomy that Microsoft has given Baystar a Put
Option for their holding in SCO.

A Put Option is an agreement that allows one company to require another company
to buy something at a certain price under certain conditions. Its the opposite
of a call option.

My guess is that Microsoft has given Baystar a Put Option that specifies that
they can require Microsoft to buy their SCO shares at least double (or
quadruple) what they paid for them, plus notional compound interest at maybe
15%-20% if SCO tanks or does not achieve a certain price by a certain time -
maybe three years. Baystar does not have to trigger the Put Option unless it
wants to so if SCO wins and its shareprice soars they are in the money.

To put it another way Baystar has been guaranteed a big return by Microsoft from
investing in SCO stock.

So Microsoft has not "technically" invested in Baystar or SCO. No
money has changed hands at all - yet. What Microsoft have done instead is give a
guarantee to Baystar that they simply cannot lose by investing in SCO.

Thats what Anderrer meant when he stated that Microsoft could
"Introduce" SCO to many more venture capital firms. Its easy,
Microsoft simply repeats the process of giving each VC a Put Option. No VC is
going to walk away from a double your money deal that is so simple, quick and
risk free.

Furthermore SCO can say it knows nothing about why the VC's have decided to
invest in them, it doesn't need to know about Put Options. It can also deny any
funding by Microsoft because Microsoft hasn't funded them. Microsoft can also
state truly that it hasnt invested in SCO.

The correct question to ask Baystar now is: "Do you have any option or
similar agreements regarding your holding of SCO shares with Microsoft or any
other entity?" My guess that they won't want to answer it.

[ Reply to This | # ]

We've all had invisible friends...
Authored by: Anonymous on Thursday, March 11 2004 @ 11:06 PM EST
We just outgrew them. Probably because we didn't realize that if we kept them
around, they were good for brokering multi million dollar deals.

[ Reply to This | # ]

Buybacks and More on BayStar
Authored by: Anonymous on Thursday, March 11 2004 @ 11:07 PM EST
Has anyone else noticed that if you take the first two initials of Mike E.
Anderer
(http://philadelphia.bizjournals.com/philadelphia/stories/1999/09/06/story6.html
)
and add them to his last name you end up with...

meanderer



A winding, crooked, or involved course;

as, the meanders
of the veins and arteries. --Sir M. Hale.

hmmmmmmm

[ Reply to This | # ]

The police
Authored by: Anonymous on Thursday, March 11 2004 @ 11:13 PM EST
is looking for a man last seen together with the missing Mr Mike Anderer. The
man is believed to between 40 an 50 years of age, of average height and normal
build. Lately the man has been posing as CEO of companies selling fake IP
liceneces. The man is believed to be armed and dangerous.

[ Reply to This | # ]

    Write-up on Morgan/Keegan and Anderer
    Authored by: Anonymous on Thursday, March 11 2004 @ 11:21 PM EST
    It's old news, but I did a write-up that looks at the background history of how SCO started all of this.

    It's long, involved, and likely rather boring. However, here's the overview timeline at the end. One interesting thing is that the Halloween VII document that says MS will start attacking Linux using IP fits right into the timeline:

    • Jul 2002 McBride is hired
    • Aug 2002 Morgan Keegan is hired
    • Aug 2002 Caldera changes name to The SCO Group
    • Sep/Nov/? 2002 MS memo discussing using intellectual property as an attack against open source is floating around in Germany and later publically
    • Oct - Dec 2002 SCO later admits to beginning to look at its own intellectual properties and first makes noise about UnixWare binary libraries.
    • Jan 2003 SCO creates stronger language to indemnify its officers of criminal activity
    • Dec? 2002 - Jan? 2003 At some point Boies is brought in, likely via Morgan Keegan, to negotiate license/stock deals with Sun and Microsoft
    • Feb 2003 Morgan Keegan clarifies its arrangement with SCO and includes language indicating they are anticipating an IBM buyout, though without naming IBM specifically
    • Feb 2003 Boies finalizes his agreement with SCO to sue IBM
    • March 2003 IBM lawsuit
    • Jul/Aug 2003 Anderer joins
    • Oct 2003 Anderer e-mail penned
    • Oct 2003 PIPE deal
    • Nov 2003 Boies has no one from law firm at key press conference
    • Nov 2003 Boies gets 20% of PIPE deal
    • Dec 2003 PIPE investors get veto power over Boies payouts
    • Nov/Dec/? 2003 16 to 20 million deal discussed by Anderer never happens

    [ Reply to This | # ]

    Harsh Press Scrutiny for SCO -- Microsoft
    Authored by: LionKuntz on Thursday, March 11 2004 @ 11:27 PM EST


    Harsh Scrutiny for SCO -- Microsoft

    This comment appeared in an article three hours ago on Microsofts MSN - MSNBC website:

    http://msnbc.msn.com/id/4509173/

    "There's no smoking gun yet showing an orchestrated Microsoft executive-level pulling of SCO's puppet strings. What there is, however, is rather unseemly involvement by Microsoft around the periphery of SCO's funding," Haff said. "Given that Microsoft, on the one hand, is a convicted monopolist and that, on the other, SCO's financial dealings and actions look increasingly shady, Microsoft should certainly be worried about even a little bit of SCO's stench rubbing off."


    http://trends.n ewsforge.com/trends/04/03/11/0819219.shtml

    "...the managing partner of BayStar Capital of Larkspur, Calif., did admit that senior executives from Microsoft approached him to ask BayStar to make such an investment. The managing partner, Lawrence Goldfarb, told BWO that neither Chairman Bill Gates or CEO Steve Ballmer were among the executives making the overture and did not name them. ..."

    "...We established in Tuesday's story that there exist many connections between Microsoft's overall strategic goals, its deep pockets, people who have been friends and allies for a long time, and the immediate need to stay alive experienced by SCO Group. This all would fit logically with the Microsoft executives going to visit Goldfarb in Larkspur.

    Why Goldfarb and BayStar would want to place such an investment in a struggling software company with a dying primary market, major public-image problems, and a mere $20,000 in licensing income in its last quarter is a question yet to be answered. This is not addressed in the BWO story; NewsForge intends to follow up on this as soon as possible. ..."


    http://www.informationweek.com/story/showArticle.jhtml?articleID=18311295 < P> "...What's really needed is a clear, unequivocal explanation of the nature of the company's [Microsoft's] relationship with SCO. As you may recall, SCO revealed last May that Microsoft had signed a contract to license some of its Unix code for an undisclosed amount. A few months later, Microsoft signed an extension to that original agreement that included additional technology and usage rights. The second deal was not disclosed by either company. Together, the deals were worth about $16.6 million, a significant 21% of SCO's total revenue in fiscal 2003.

    The mystery behind Microsoft's arrangement with SCO could be cleared up, and maybe some of the speculation put to rest, if Microsoft would disclose more details about how it plans to use SCO's technology. But it won't. I've asked for that information four times in the past 12 months, but Microsoft will only discuss its plans in the broadest terms, and even then unconvincingly. Microsoft has indicated that it intends to use SCO's Unix code in Microsoft's Services For Unix product, a subsystem of Unix APIs and protocols that helps customers move Unix or Linux applications over to Windows or lets those mixed environments co-exist through interoperable files and directories.

    But I was surprised to learn that Services For Unix version 3.5, when it was released in January, didn't include any of the new SCO code available to Microsoft through the licensing agreement. SCO's technology "wasn't a factor in this release," Dennis Oldroyd, a director with Microsoft's Windows server group told me in a January briefing on SFU 3.5. Oldroyd explained that Microsoft was "pretty far in the development cycle" for SFU 3.5 when the SCO license was signed.

    ...Last week, when I asked Microsoft for the fourth time about its plans to use the code that's at the center of the technology industry's biggest legal storm, here's Microsoft's E-mail response in its entirety: "The terms of Microsoft's agreement with SCO are confidential. As such we can't disclose full details or financial terms. That said, the license with SCO was extended under the option in the original agreement, to grant rights to additional technology related to Unix interoperability and broaden MS rights around already licensed technology. The end result is more flexibility in potential product design, development and deployment. ..."




    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: blacklight on Thursday, March 11 2004 @ 11:31 PM EST
    The backbone of any investigation is the process of collecting information, in
    particular information that can be used as evidence. If Microsoft has not
    engaged in improper behavior with respect to Baystar and RBC, then Microsoft has
    nothing to fear. Otherwise, the strands will be woven together one at a time at
    groklaw until the full web of deceit is reconstructed. At that moment, Microsoft
    had best pray that it is not found to be at the center of that web.

    The SCO Group is one ugly spider, but takes pride of place only because it is
    the most obviously visible spider. The ugliest spider is the one that actually
    put together the web along the strands of which the SCO Group is running. Both
    Microsoft and Canopy may rest assured that in time, the groklaw community will
    uncover the identity of the owner of that web.

    [ Reply to This | # ]

    Wasn't Stockbuyback at $16 required in Baystar Deal?
    Authored by: LionKuntz on Thursday, March 11 2004 @ 11:36 PM EST

    I am too tired to go back to look for it again, but I was reviewing some facts
    about the Baystar Deal, and it required SCO to redeem the stock portion SCO gave
    to Baystar at $16 and change. Isn't that above where the market is now, and
    wouldn't this be a redemption of the stocks at that price by the folks who put
    up the money behind Baystar? They (Baystar investors) can get above-market
    prices paid for with the money they once loaned SCO when the stock was at
    $10-$12?

    SO SCO kited the stock to $20 bucks but couldn't hold it there, and the
    moneybags who financed this run-up are guaranteed $16 if they haven't already
    cashed in by now?


    [ Reply to This | # ]

    What's in the No-Action Letter?
    Authored by: Anonymous on Thursday, March 11 2004 @ 11:41 PM EST
    The SEC shows a no-action letter filed on March 1. This was filed as a paper document and no information as to its content appears readily available.

    The SEC's site says this about no-action letters:

    An individual or entity who is not certain whether a particular product, service, or action would constitute a violation of the federal securities law may request a "no-action" letter from the SEC staff. Most no-action letters describe the request, analyze the particular facts and circumstances involved, discuss applicable laws and rules, and, if the staff grants the request for no action, concludes that the SEC staff would not recommend that the Commission take enforcement action against the requester based on the facts and representations described in the individual or entity's original letter. The SEC staff sometimes responds in the form of a no-action letter to requests for clarification of the legality of certain activities.

    Are these paper documents available anywhere?

    [ Reply to This | # ]

    Question on BayStar
    Authored by: Glenn on Thursday, March 11 2004 @ 11:59 PM EST
    The question that keeps nagging my poor little brain is just what would
    induce BayStar and canada's biggest bank to invest twenty and thirty million
    dollars respectively in SCOG, a company that has never shown a profit and with
    two lawsuits (at the time) pending in courts?
    It is my understanding that banks (at least in the U.S.) are really
    conservative in their investments and are not likely to put themselves out on a
    limb with such a high risk investment. And from any logical point of view, any
    investment in SCOG should be viewed as a high risk affair.
    I would imagine that venture capital firms also would do a good deal of
    investigating before committing twenty million dollars in such a shaky
    proposition.
    I am trying to take a tep back from my bias towards SCOG and am finding it
    very difficult. But wouldn't a bank or venture capital firm have their legal
    beagles check out the legal facts surrounding SCOG's claims and issue an opinion
    on the liklihood of SCOG prevailing against IBM.
    SCOG is only attractive in the long run if it prevails in its case against
    IBM and receives the damages it has asked for. Are there any lawyers that are
    not in the pro SCOg or pro open source camps that have made any in depth
    analyses and comments on the SCOG case(s) and are they that positive?
    Most of the noninvolved lawyer commets that I have seen have been very
    cautious in their comments.
    It would seem to me that for BayStar and RBC Canada to invest that kind of
    money in SCOG, they would have to have had some kind of strong assurances from
    someone that they ARE sure of, that they will not lose their investors' money.
    Where would those assurances come from? Rob Enderle? Laura Didio?
    The only other two companies that have made any "contributions" to
    SCOg are who?
    I do not have the answers, but I still have the questions.

    Glenn

    [ Reply to This | # ]

    About that 20%
    Authored by: utahbob55 on Friday, March 12 2004 @ 12:14 AM EST
    How will SCO be able to give their counsel 20% when they are only going to get
    5%. If I am not mistaken SCO must turn over all monies collected to Novell and
    is then paid back a royalty of 5%.

    [ Reply to This | # ]

    Posting home address and other personal info
    Authored by: belzecue on Friday, March 12 2004 @ 12:37 AM EST
    Friends: please consult PJ before you post anyone's personal info (e.g. home address) on this site. If the info is publicly *and widely* available (i.e. does not require much digging) then it is probably safe to do so. But, however much you feel a person 'deserves' the spotlight, please treat their personal privacy with the same respect you would demand.

    -----

    Anderer's Address Authored by: [member] on Friday, March 12 2004 @ 12:12 AM EST Has anyone checked out his home/business address to see if Anderer still lives/works there?:

    [ADDRESS REMOVED]

    If you look up the S2.com URL you get this business address, but when you look up the property records this address comes up as a residential property, so I don't know if this is his home, work or both.

    [ Reply to This | # ]

    More on MS involvement
    Authored by: Anonymous on Friday, March 12 2004 @ 01:35 AM EST
    According to BayStar, MS

    1. Did not indemnify BayStar against SCO risk

    2. Did not invest as individuals (as opposed to corporate investment)

    I guess this largely kills two lines of speculation

    http://www.nytimes.com/2004/03/12/technology/12soft.html?ex=1079758800&en=79
    bdf85f45a3dfb6&ei=5062&partner=GOOGLE

    [ Reply to This | # ]

    Andere means "other" in german
    Authored by: dodger on Friday, March 12 2004 @ 01:37 AM EST
    It was that "other" guy who put the deal together. It is very possible
    he didn't disappear; he could have NEVER EXISTED!

    [ Reply to This | # ]

    NYTimes: Microsoft Said to Encourage Big Investment in SCO Group
    Authored by: tce on Friday, March 12 2004 @ 01:37 AM EST
    here (login required) STEVE LOHR writes about the confirmation of the Microsoft pointer to Bay Star.

    He does a pretty good job of getting the whole story on one page... nice material from a formal source for sharing with the unaware. For example:

    Microsoft stands to gain most from any slowing of the advance of Linux, which is maintained and debugged by a network of programmers who share code freely. That model of building software is called open source development.

    --Tom

    [ Reply to This | # ]

    Nice explanation from the Yahoo:SCOX wizards :)
    Authored by: Callan.ca on Friday, March 12 2004 @ 02:16 AM EST
    ____________________________________________
    How many shares did SCO promise to buy back?

    None. The plan merely authorizes a buyback and sets limits on the number of
    shares (1.5 million) and the time for buying them (2 years.)

    Why is the limit 1.5 million shares?

    Under the PIPE agreement SCO can't buy back any shares except those that were
    registered for issuance to employees. Currently, 1.5 million shares are
    registered under the 2002 Omnibus Stock Incentive Plan.

    What happens if SCO does buy back shares?

    The shares are not retired; they're held in treasury. SCO ends up reissuing them
    as payments to lawyers, insiders, or PIPE investors.
    ____________________________________________

    ---
    IANAL, IANAP, IAAC (I am a Canadian)

    [ Reply to This | # ]

    sense of humor?
    Authored by: husemann on Friday, March 12 2004 @ 02:56 AM EST

    "Anderer" in German means "someone else" as in "it's not me but someone else"...

    [ Reply to This | # ]

    Updates and News
    Authored by: davcefai on Friday, March 12 2004 @ 03:58 AM EST
    Two pieces in The Register on SCO. Both of them distinctly unsympathetic!

    http://www.theregister.co.uk/content/7/36203.html

    Quote: "But the move did not have the desired effect, at least during
    Thursday's trading. After a brief run up to $10.18, SCO closed the day down
    almost three per cent to $9.25."

    and

    http://www.theregister.co.uk/content/4/36202.html

    Quote: "Long-term Redmond watchers will be shocked and dismayed by the
    news. Previously Microsoft has been a staunch supporter of open source, praising
    it as a "cancer", a "virus" and a threat to the capitalist
    economy. "

    [ Reply to This | # ]

    corel M$ and royal bank ?
    Authored by: borneo on Friday, March 12 2004 @ 04:08 AM EST
    "When asked Thursday if Microsoft or any of its divisions had any input
    into the Royal Bank of Canada portion of the PIPE deal, Microsoft spokesman
    Martin told NewsForge that 'Microsoft had no involvement in that matter.'"

    Was Royal Bank of canada involved in the Corel deal ?
    they may have bought some junks bonds of that time

    [ Reply to This | # ]

    OT : PJ, isn't it time that...
    Authored by: Anonymous on Friday, March 12 2004 @ 05:18 AM EST
    .....Somebody did another Open Letter to SCO?

    [ Reply to This | # ]

    Canopy/Yarro
    Authored by: DaveWalley on Friday, March 12 2004 @ 05:31 AM EST
    The 76% figure appears to be wrong.

    Recent EDGAR SC 13G/A filing here, dated 13 February 2004, shows a 5,492,834 shares owned by Canopy, with 29,021 shares and 60,000 options held by Mr Yarro.

    This appears consistent with the statement that Canopy owns approximately 40% (in the last 10-K, which showed 13,824,000 shares issued).

    The prospectus for the IPO showed that after completion, 72.9% of the company (then Caldera Systems) would be beneficially owned by Raymond J Noorda, of which 55.7% was via Canopy (previously NFT Ventures Inc), the remainder being holdings via MTI and Lineo.

    This also prompts the suggestion that a privatisation-oriented buyback at current price of $10 would be an effective reversal of the IPO, which had a share price of $14 (effectively $56 after adjustment for the reverse-split), and would not be helpful to the company's case in its IPO lawsiut.

    [ Reply to This | # ]

    OT - (humor in The Register) BOFHs latest has a striking similarity to the SCO case :-)
    Authored by: ccs on Friday, March 12 2004 @ 06:06 AM EST

    When I read this, I knew i had to share the link here.

    ROTFL

    And here the link: BOFH: Protecting bodily waste in the public domain (at The Register)

    CCS

    [ Reply to This | # ]

    White pages...
    Authored by: Anonymous on Friday, March 12 2004 @ 06:11 AM EST
    This query: http://www.whitepages.c om/search/Find_Person?firstname_begins_with=1&firstname=M&name=Anderer&a mp;city_zip=&state_id= lists (all?) six 'M Anderder's prino

    [ Reply to This | # ]

    Will SCO become a private company?
    Authored by: Anonymous on Friday, March 12 2004 @ 06:21 AM EST
    Some more speculation in the The Salt Lake Tribune:
    SCO parent Canopy Group, and its CEO Yarro, together own nearly 11 million, or 76 percent of SCO common shares, according to the U.S. Securities and Exchange Commission. Knowing that, Jenson speculated the buyout could be a precursor to taking SCO private.

    The advantage for The SCO Group will be that they no longer need to publish their results. We'll see what happens.

    H@ns

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: Tsu Dho Nimh on Friday, March 12 2004 @ 06:41 AM EST
    "'At current prices, we believe our stock represents an attractive
    investment opportunity and that this action reflects our ongoing commitment to
    improving long-term stockholder value.'""

    yeah, yeah ... so why are all the insider transactions reported SALES and not
    PURCHASES? When a company exec sells some stock, that's OK, but when they have
    ALL been selling steaqdily every time an option matures, that's a sign they
    don't believe in their koolaid's advertising.

    The "private" deals in the buyback could allow SCO to use the last of
    their corporate cash to buy out a lot of stock from Yarro, Canopy and any other
    persons they want to reward for helping them through these difficult times.

    [ Reply to This | # ]

    Michael Anderer
    Authored by: lordmhoram on Friday, March 12 2004 @ 06:47 AM EST
    Just found a mention of a Michael Anderer, on the staff of the University of
    South Carolina:

    http://www.sc.edu/research/boardmember.shtml

    The biog for him gives:

    CEO of Bellevue, WA-based consulting firm Entirenet
    Founder of The Computer Group
    1998 Outstanding Young Alumnus for USC School of Engineering
    B.S. in chemical engineering from USC

    I wonder, could this be the same guy?


    [ Reply to This | # ]

    MS & BayStar link
    Authored by: Anonymous on Friday, March 12 2004 @ 07:00 AM EST
    anyone else seen this article in The Australian?

    Microsoft-SCO link confirmed

    "SCO Group investor Baystar Capital has confirmed that Microsoft introduced the two companies.
    Lawrence Goldfarb, managing partner at Baystar Capital, said Microsoft senior executives phoned him last year to ask if his company would be interested in investing in SCO" http://www.australianit.news.com.au/articles/0,7204,8944855%5E153 16%5E%5Enbv%5E,00.html

    [ Reply to This | # ]

    Gates due in court soon
    Authored by: Anonymous on Friday, March 12 2004 @ 07:21 AM EST
    According to Bob Cringley's latest article, Bill Gates is due in court soon to answer Burst.com's questions regarding MS's deletion of internal email relating to MS's alleged theft of Burst's technology.

    Bob reported that he found a court document indicating a named MS official is being cited as ordering email deletion which is something MS have always denied.

    "The implication of this document is that Burst found an e- mail from Allchin ordering people working under him to destroy certain e-mails. If true, this goes against Microsoft’s stated position that it leaves it up to individual employees to decide what to erase and what to keep -- a position that has been very useful to date because it has allowed Microsoft to lose embarrassing e-mail pretty much with impunity."

    A PDF of the document is here.

    Does anyone know anymore info on the case or where to find it? I would guess IBM, Novell and RedHat's lawyers would all be interested in what Gates has to say.

    [ Reply to This | # ]

    Failing at FUD 101
    Authored by: the_flatlander on Friday, March 12 2004 @ 07:55 AM EST
    Forgive me, please, while I think out loud, as it were, at my keyboard.

    The FUD regarding our own esteemed Ms. Jones: She lives in the *same* state as
    IBM, her web site is hosted by an organization that received, once upon a time,
    a donation from IBM. Obviously, then, Ms. Jones is merely a proxy for IBM.

    You know, that has just enough truth to be worth throwing in front of the press
    in an attempt to discredit PJ. (I still haven’t figured out why an association
    with IBM would mean anything, since much of what PJ does is simply to present
    the facts as are otherwise available in the public records.)

    Now, Microsoft, as it turns out, asked an investment company to give SCO 50
    Million Dollars U.S., and this I am to take as mere coincidence? It just
    happened that they asked these guys to give the SCOundrels the money. It could
    just as easily have happened that they might have told them to give *me* the
    money. Right. It isn’t like Microsoft is in the same state as BayStar. It
    isn’t like BayStar has a web-site hosted on equipment that Microsoft might have
    donated. There’s *no* obvious connection there.

    Okay. Look, you have to leave some room for doubt, and uncertainty, otherwise
    the whole FUD thing falls to just Fear. And that is not an effective marketing
    strategy, I’m afraid.

    The Flatlander

    The SCOundrels can’t sell software. The SCOundrels can’t win lawsuits. The
    SCOundrels can’t do FUD marketing effectively. Frankly, they are beginning to
    look completely useless.

    [ Reply to This | # ]

    OT: www.sco.com back up
    Authored by: Anonymous on Friday, March 12 2004 @ 08:19 AM EST
    Netcraft reported 03/08 that www.sco.com is back up, after having been deliberately taken down by SCO itself on February 2.

    "www.sco.com Back Online

    The www.sco.com web site was brought back online by The SCO Group over the weekend after an extended hiatus following the MyDoom-related distributed denial of service (DDoS) attack on the site.

    http://news.netcraft.com/archives/2004/03/08/wwwscocom_back_online.html "

    And, for those with a taste for irony:

    http://uptime.netcr aft.com/up/graph?site=www.sco.com

    "The site www.sco.com is running Apache on Linux.

    Linux users include Dialtone

    Apache is also being used by Rackspace"

    t_t_b

    ---

    Mad cow? You'd be mad, too, if someone was trying to eat you.

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: Anonymous on Friday, March 12 2004 @ 08:31 AM EST
    So the phone and fax on S2.com's whois is obviously fake.
    Isnt that a violation of ICANN's regulations?

    Not that they're even using the domain, but why hasnt NSI suspended their domain
    yet?

    [ Reply to This | # ]

    OT: WSJ Journal Biased Red Hat Article
    Authored by: Anonymous on Friday, March 12 2004 @ 08:59 AM EST
    The Wall Street Journal had a very negatively biased article on Red Hat and
    Linux in general.

    It was a 27% empty article:

    "A recent poll conducted by Gartner Group suggested that 27% of more than
    100 respondants were slowing their deployment of Linux, or avoiding the
    operating system, as the result of fears of litigation."

    What about the 73% who are increasing or maintaining their Linux deployments.
    Talk about a biased slant!

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: Anonymous on Friday, March 12 2004 @ 09:35 AM EST
    You guys are spilling a lot of <digital> ink speculating on why SCO is
    doing this, and trying to figure out the logic behind it. You are giving them
    too much credit. They may not have a strategy. Precious few businesses make
    business decisions based upon thought, logical or otherwise. Most business,
    large and small, make decisions based on emotion, gut "instinct", or
    sheer randomness. Evidence of past behavious suggests SCO is no different.

    [ Reply to This | # ]

    Mr. Anderer, pick up the white courtesy phone...
    Authored by: T. ProphetLactus on Friday, March 12 2004 @ 09:35 AM EST
    There is a Mr. Hoffa calling, with some advice for you.

    An MS investment 'suggestion' is similar to a serpent's fruit recommendation, it
    would seem.

    TPL

    [ Reply to This | # ]

    Slightly OT
    Authored by: s21mag on Friday, March 12 2004 @ 10:07 AM EST
    All this sp eculationof SCOG going under has made me wonder. Assume for the
    moment that they actually DO own the copyrights. Who whould then own those? In
    the bankrupcy would all their assets be up for sale? Would they go to Canopy? If
    so, and the object of all this is only to halt the spread of Linux,what's to
    prevent them from assigning them to another of their holdings and starting this
    little scenario all over again?




    ---
    L. W. Yost


    Luck is when preparation meets opportunity.

    [ Reply to This | # ]

    Looks like the end-game
    Authored by: Anonymous on Friday, March 12 2004 @ 10:08 AM EST
    I'd say the insiders are setting up to get out before the fall (in 45 days minus
    however long it's been since Judge Wells' ruling) or at least to keep IBM from
    doing an 'all your SCO are belong to us'

    [ Reply to This | # ]

    SCO: United Under $$$$
    Authored by: Anonymous on Friday, March 12 2004 @ 10:12 AM EST
    If they go private they will blame Groklaw.Com for using their own words against
    them. Sounds Great.

    [ Reply to This | # ]

    Could MS Have Licensed Linux?
    Authored by: dmscvc123 on Friday, March 12 2004 @ 10:25 AM EST
    As I recall there was so open source components found in the most recent code
    leak. I forget the name of the specific program, but it was pointed out that
    although it was within the license terms of that open source product to put it
    in, it was unethical to use open source products in your software on one hand
    but bash open source in public on the other hand.

    Now since MS has never let ethics get in its way, could they have licensed Linux
    source code to put into their software? Afterall, if you believe everything SCO
    says about what they own and that the GPL isn't valid, etc., couldn't MS say
    they were "legally" entitled to put Linux code in their products since
    SCO "owns" it? That way we wouldn't see MS Linux, but rather MS
    Windows stolen from Linux.

    [ Reply to This | # ]

    SCO attempting to privatize Linux
    Authored by: Anonymous on Friday, March 12 2004 @ 10:31 AM EST
    From URL:

    http://www.thestreet.com/_yahoo/markets/marketfeatures/10148199.html

    SCO Group Likes Its Stock at These Levels

    By TSC Staff
    3/11/2004 11:55 AM EST

    Updated from 10:02 a.m. EST

    SCO Group (SCOX:Nasdaq - news - research) continued to beguile Thursday,
    announcing a share buyback after a ninefold run-up in its stock price that
    reflects wagering on its multimillion-dollar legal campaign to privatize Linux.

    The technology outfit said it will buy back up to 1.5 million common shares over
    the next 24 months, believing as it does that they are an "attractive
    investment opportunity" at current levels. That level was recently $9.50,
    down a penny from Wednesday night, but up from the $1.09 they touched in
    February 2003.

    © 1996-2004 TheStreet.com, Inc. All rights reserved.

    [ Reply to This | # ]

    McBride Exit stategy?
    Authored by: Anonymous on Friday, March 12 2004 @ 10:41 AM EST
    http://cma.zdnet.com/texis/techinfobase/techinfobase/+Awo_qoWKK+sX6s/cdisplay.ht
    ml

    After suit, McBride is out at Ikon.

    By: Jerry Rosa Computer Reseller News Published 10/19/97


    Abstract

    Ikon Office Solutions fired executive Darl McBride less than a week after
    McBride filed a $10 million suit against the company. The suit charges Ikon and
    Chmn and CEO John Stuart with breach of contract and defamation of character. It
    also contends that Ikon reneged on a promise to reward McBride and his
    management team for assembling a huge integration unit in Utah. Ikon maintains
    that McBride's firing was based on philosophical differences concerning the
    strategic directions of the company's Technology Services unit. McBride built
    the Technology Services unit through an 18-month acquisition spree. His firing
    also resulted in the closing of the Utah office where McBride worked and the
    firing of most of his nine-member support staff.




    [ Reply to This | # ]

    Anderer?
    Authored by: Anonymous on Friday, March 12 2004 @ 10:43 AM EST
    Probably inexplicably jumped out of an aircraft over the
    barrens of Utah.

    Bre-X.

    Derek

    [ Reply to This | # ]

    S2 Partners LLC
    Authored by: Anonymous on Friday, March 12 2004 @ 11:21 AM EST
    I checked into the details of the expired license for S2. Yes, Utah indicates
    that S2.com corporation's license expired some time ago (late 1/18/2002).

    [Search Utah business database at
    https://secure.utah.gov/bes/bes
    with S2 as search term]

    But Anderer has another entity which is only now delinquent in licensing fees
    (last renewed a year ago, 3/5/03) in Utah.
    This business entity is S2 Partners LLC, 56 E. Broadway, Ste. 100, Salt Lake, UT
    84111. He may be hard to find, but the corporation/LLC exists. Of note S2
    Partners, LLC is Delaware based

    SCO/S2 documents also indicate another name:
    S2 Strategic Consuting, LLC, which is also incorporated in DE

    [try DE web site and search for S2 Strategic Consulting:
    https://sos-res.state.de.us/tin/controller]

    S2.com also registered in DE.

    Status can be found (for a $10 fee)

    Where do we try to reach Anderer? DE or UT?

    [ Reply to This | # ]

    Numbers in Bob Mims Article
    Authored by: Anonymous on Friday, March 12 2004 @ 11:31 AM EST
    Two questions about numbers in the lastest Bob Mims article.

    1. Damages claim against IBM: "And a potential payoff remains: SCO is
    seeking up to $50 billion in damages from IBM."

    If Bob likes the $50 billion amount so much (and he does!), shouldn't he express
    it more like "SCO is seeking up to $5 billion in damages, and has indicated
    in a comment it may seek up to $50 billion."?

    2. Baystar redemption price: "The San Francisco-based hedge fund apparently
    has a redemption clause that might kick in if SCO stock dips below $6.75 and
    stays there for 20 consecutive trading days."

    50% of the $16.93 conversion price is $8.46, not $6.75, yes?

    [ Reply to This | # ]

    OT: SCO Employee Loyalty?
    Authored by: Anonymous on Friday, March 12 2004 @ 11:42 AM EST
    If I was a SCO employee, I would surely feel that
    SCO was gambling with my job. If a company was
    gambling with your future such as what SCO is doing,
    how would you feel? I do not think I would maintain
    any loyalty long-term.

    This wreaks almost to that of Enron but not quite.

    [ Reply to This | # ]

    Buyback means cash to Canopy
    Authored by: blang on Friday, March 12 2004 @ 11:57 AM EST
    All reporters so far has failed to mention the only possible motive that makes
    any sense behind this buyback.

    SCOX has a lot of cash.

    This cash was obtained from a private equity placement at a time when the shares
    were highly valued (almost $17).
    (which seems to be 100% hedged judging by the short ratio)

    If SCO had tried to obtain such financing by offering shares on the open market,
    it would have decimated SCO's share price to the $5-$10 level. The PIPE deal
    allowed SCO to get this cash without negatively harm the share proce in the
    short term.

    However, all this cash is at risk.
    1)Litigation cost is consuming a lot of cash.
    2)SCO must pay hefty dividens on these shares.
    3)SCO is being sued by Redhat, and also faces countersuit from IBM. Also, the
    Novell litigation poses a near term risk that would be fatal to all other
    litigaiton SCO is involved in.

    Canopy holds enough shares to cash out all of the buyback, which would be worth
    $25 million to Canopy.

    The buyback announcement said the shares could be purchased off market.

    This buyback is the only possible way for Canopy to move the PIPE cash from
    SCO's accounts, to Canopy's account, and prevent the PIPE money from being lost
    in litigation.

    Time is also of the essence. The share price is hovering close to the redemption
    price. If redemtion is triggered, all of SCO's cash will be paid back to the
    PIPE investors.

    So this buyback is all about 1 thing:
    Survival in the short term, long enough for Canopy to take over SCO's cash.

    It would be interesting to know what RBC and Baystar thinks about this. It is
    very likely that they are 100% hedged, in which case, the following will be the
    math at the end of the day:

    Winner: Canopy. Managed to get $25 million out of a company worth virtually
    nothing.
    Neutral: Baystar/RBC. Stand to lose most of their investment, but is likely
    hedged so that they end up with a small profit.
    Losers: Retail investors and institutional investors who were not hedged.












    [ Reply to This | # ]

    Contract - SCO and S2
    Authored by: Peter Simpson on Friday, March 12 2004 @ 12:02 PM EST
    Found this while Googling for S2 Strategic Consulting.
    Appears to be the contract between Anderer and SCO, used as an example of a
    contract?

    http://contracts.onecle.com/sco/s2.warrant.2003.07.01.shtml

    [ Reply to This | # ]

    incubators
    Authored by: lordmhoram on Friday, March 12 2004 @ 12:05 PM EST
    Why does this word "incubator" keep popping up on web pages which
    mention Mike Anderer? I've never come across it in anything other than the
    neonatal context before!

    Look at these two extracts: (from
    http://www.medicity.com/infosite/second/news/html/article_00_0313.htm

    "Medicity has set up shop at 56 E. Broadway, and Philadelphia-based Silocon
    Stemcell plans to open a high-tech incubator at the same building, in which it
    will have part ownership and is set to close on this week, according to James
    "Kipp" Lassetter, CEO of Medicity and a friend of Silicon Stemcell's
    Mike Anderer, who will run the incubator."

    And later:

    '"Mike plans on taking down more real estate and growing a huge ability to
    create value in companies, because basically what an incubator does is take
    three guys and an idea and put seed funding, give them office space,
    network."'

    Doubly weird, given the genuinely medical context of this page.

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: JustFree on Friday, March 12 2004 @ 12:14 PM EST
    It is strange that Santa Cruz Sentinel would report on SCO buyback program and the stock quotes are all wrong. It is kind of ammusing, but really strange.

    "In the last 52 weeks, shares have traded between $8.75 and $31.35."

    [ Reply to This | # ]

    BayStar and World Online
    Authored by: Anonymous on Friday, March 12 2004 @ 12:20 PM EST
    Not sure wether this matters, but it is at least some more info about BS.

    "[...]

    BayStar was overigens ook een van de investeringsbedrijven die destijds betrokken waren bij de beursgang van World Online. Nina Brink verkocht onder meer aan BayStar een grote hoeveelheid WOL-aandelen voor zes euro per stuk.

    Deze deal stond echter niet in het prospectus vermeld, maar werd ontdekt voordat WOL definitief naar de beurs ging. Om de beursgang zelf niet uit te stellen, besloot Brink af te zien van haar verwachte winstdeling. Hierdoor zag zij bijna 55 miljoen euro (destijds 120 miljoen gulden) aan haar neus voorbij gaan."


    Rough translation:

    BayStar was btw also one of the investor companies which was involved with the going to the change of World Online. Nina Brink [CEO WOL] sold including to BayStar a big amount of WOL-shares for 6 EUR per share.

    This deal was however not mentioned in the prospectus, but was discovered before WOL went definite to the change. In order to not delay the going to the change, Brink decided to pass her expected profit-sharing. Because of this, she saw 55 milion EUR (at that time 120 milion guilder) passing her nose.

    Source (in Dutch): http://www.webwereld.nl/nieuws/18012.phtml

    This happened in The Netherlands and something important isn't noticed here because it is widely known and history; ie. not news. IIRC Brink wasn't convicted of a crime but you better believe she's hated by the people who bought her shares, and who she seemed to have betrayed, including her damn employers!

    [ Reply to This | # ]

    • Beursgang - Authored by: Anonymous on Friday, March 12 2004 @ 04:45 PM EST
      • Beursgang - Authored by: Anonymous on Friday, March 12 2004 @ 06:00 PM EST
    2nd Seattle PI Story-Microsoft & Baystar
    Authored by: Anonymous on Friday, March 12 2004 @ 12:25 PM EST
    Todd Bishop, a reporter for the Seattle PI, has a quite informative Friday
    story with more on the dealings between Microsoft and Baystar. It's at:

    http://seattlepi.nwsource.com/business/164447_msftsco12.html

    The legal experts he interviewed did not seem to think that Microsoft's
    role in the financing would break antitrust laws, unless it
    threatened to harm Baystar if it did not make the investment.
    Translation: Bribes to others so they destroy your competitors is OK,
    but bullying them isn't. Not very good law.

    Ironically, that drives home the point that Microsoft is not merely a
    technical monopoly due to it's 90+% market share, but precisely the sort
    of ever-predatory monopoly that antitrust laws are intended to
    muzzle. The late 19th to early 20th century steel, oil and rail trusts were
    notorious for employing clever lawyers and exploiting loopholes in the
    law.

    In the case of perhaps the worst of the lot, John Rockefeller's
    Standard Oil, in the end the only solution that worked was to break it up
    into 17 competitors who turned their ruthlessness on each other.
    Rockefeller never got the message that his behavior was wrong. Gates &
    Co. seem to suffer from a similar problem. Right and wrong always
    translates into whether they will be punished or not.

    At best BayStar will come out of this looking not very bright and more
    than a little nasty. They justified their investment in SCO based on its
    "cash flow and intellectual property." Its cash flow was never good
    and is
    now negative, while its ownership of Unix copyrights is contested by
    Novell. Really dumb.

    And open source supporters should not forget that if BayStar really
    thought it could make money off SCO (rather than from Microsoft
    paybacks), then it hoped to do so by trashing Linux and open source by
    burdening it with huge license fees. If so, it ranks among the
    "bad guys" with SCO and Microsoft. If the money they put in SCO does
    prove a bad investment, it might be good to make sure the
    investment industry never forgets that.

    [ Reply to This | # ]

    More On Anderer/Stemcell
    Authored by: dmscvc123 on Friday, March 12 2004 @ 12:34 PM EST
    From a Salt Lake Tribune article talking about a patent assigned to Anderer
    (among others):
    "Method for managing printed medium activated revenue sharing domain name
    system schemas, patent No. 6,546,418, invented by Robert J. Schena of Wayne,
    Pa., Mike Anderer of Salt Lake City, Peter B. Ritz of Meadowbrook, Pa., and Mike
    Bernstein of Tucson, Ariz., assigned to AirClic Inc. of Blue Bell, Pa."
    http://www.sltrib.com/2003/Apr/04142003/monday/47686.asp

    Now AirClic is a viable company and it turns out the co-founder used to work for
    Anderer:
    http://www.airclic.com/about/about_management.html#ritz
    Also it turns out that Silicon Stemcell is an investor in AirClic according to
    the website.

    Here's another connection between Silicon Stemcell and AirClic via this company
    called DBAC:
    http://www.futurevision.com/history.html

    Also I found this old article on IKON where it interviews both Anderer and
    McBride when they were VPs:
    http://www.iweek.com/650/50iuun4.htm

    Here's another thing on Silicon Stemcell/Anderer saying that they'll be in the
    same Salt Lake building as Medicity:
    http://www.medicity.com/news_ent1.htm

    Also this explains why S2 is called S2 - S1 is another name for Silicon
    Stemcell:
    http://www.smartben.com/sbmk/SBMK.doc

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: Anonymous on Friday, March 12 2004 @ 01:16 PM EST
    Agent Smith voiceover "What good would contact do, Mr. Anderer, if you are
    unable to speak..."

    [ Reply to This | # ]

    Does Mr. Anderer exsist?
    Authored by: Anonymous on Friday, March 12 2004 @ 02:21 PM EST
    Or is he some alias for a go between from SCO to MS? It
    isn't hard to set up a fake company.

    [ Reply to This | # ]

    WALDO SURFACES
    Authored by: Anonymous on Friday, March 12 2004 @ 02:51 PM EST
    Mystery S2 middleman has surfaced to talk to NewsForge.
    He does a lot of mincing around, claims he can't talk about the PIPE deal, and goes on at length to try and show what an evenhanded, pragmatic guy he is.
    I'm frankly too tired to try and thresh and winnow his meandering comments, but I will say that I found the very nature of his writing to be evasive, cryptic and downright eye-glazingly boring in its incoherent, rambling style.
    Somebody who has had more sleep should have fun with this. One comment seemed to be aimed at suggesting that there are evil trolls on his trail - something about signing on as a child to exploit privacy laws. That one penetrated the fog.
    Summary: Sounds like a fast talking grifter backing away from an angry mark.

    Thanks again, the actual Tim Ransom, presently not logged on (more on that another time)

    [ Reply to This | # ]

    SCO-MS connection in Germany?
    Authored by: m_si_M on Friday, March 12 2004 @ 04:03 PM EST
    heise.de reports another possible SCO-M$-connection:
    [http://www.heise.de/newsticker/meldung/45496]

    Gregory Blepp, vice president SCOSource will make a speech at CeBIT in the name
    of dmmv. SCO is a member of the German multimedia association (dmmv), an
    organisation that speaks out for strengthening IP and DRM in Germany.

    This is what Heise wrote:

    "Here's a delicate connection as well: Rudolf Gallist, dmmv vice president,
    who was manager of German Microsoft GmbH from 1991 until 2000, is said to have
    stood up for the appointment of Blepp [Blepp will take a leading position in
    dmmv]. A member of dmmv describes the sign given, with a SCO Group top executive
    in the "association of digital economy", as dmmv characterizes itself,
    "very awkward". Another member held the counterposition: "It is a
    sign for German software industry, that intellectual property of others has to
    be respected." SCO's immediate counterparts won't be very interested in the
    matter: IBM left the association, Novell is no member"


    ---
    C.S.

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: Kevin Snodgrass on Friday, March 12 2004 @ 06:34 PM EST
    Bob Mims of the Salt Lake Tribune dangles another possible motive for the buyback in front of us:

    "SCO parent Canopy Group, and its CEO Yarro, together own nearly 11 million, or 76 percent of SCO common shares, according to the U.S. Securities and Exchange Commission. Knowing that, Jenson speculated the buyout could be a precursor to taking SCO private."

    Going private would, of course, mean no more SEC filings would be required. Can that 76% figure really be accurate?

    No, the 76% figure is incorrect. Mr. Mims needs to learn how to read financial statements. From sec.gov, about half way down in the section "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT":

    [major snippage of unneeded info, check the above link if you are curious about the accuracy of this info]

    Name # of Shares % of Class

    Principal Stockholders:

    The Canopy Group, Inc. 5,492,834 38.7 %

    ..snippage...

    Named Executive Officers And Directors:

    Ralph J. Yarro III 5,614,355(1) 39.5 %

    Then read the notes, especially note 1 since it refers to Yarro. (That's the (1) right after the number of shares listed for him)

    Consists of options to purchase 82,500 shares of common stock, 10,000 shares of common stock acquired through an open-market purchase, 175 shares of common stock, 28,846 shares of common stock received for service on the Board, and 5,492,834 shares of common stock held by The Canopy Group. Mr. Yarro is the President and Chief Executive Officer of The Canopy Group. Mr. Yarro disclaims beneficial ownership of the shares held by The Canopy Group except to the extent of his pecuniary interest therein.

    Notice it says his reported beneficial ownership number includes the 5.4+ million shares held by Canopy. That is the number reported at the beginning for Canopy. Add that number with the options (82,500), open market purchase(s) (10,000), common stock otherwise owned (175), and shares received for being on the board (28,846) and you get 5,614,355, the number listed as beneficially owned by Yarrow.

    What Mims did was add the Canopy shares with the Yarro shares to get to this 76% control number. He is adding the Canopy shares twice, since these shares are listed twice and Mims doesn't read (or doesn't understand) the notes.

    BTW PJ, you rock!!

    [ Reply to This | # ]

    Buybacks and More on BayStar
    Authored by: editingwhiz on Friday, March 12 2004 @ 07:27 PM EST
    Mike Anderer sent NewsForge his response Friday morning, saying as much as he could about Microsoft, SCO and IP licensing while under NDA. It's the lead story today on http://newsforge.com.

    /cp

    [ Reply to This | # ]

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