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SCO Responds to BayStar: We're Keeping Your Money and Our Business
Sunday, April 25 2004 @ 10:48 AM EDT

Bob Mims got some interviews, and here is the SCO reply to BayStar (so far): They don't have to give the money back and they intend to stay in the UNIX business. They believe they can return the company to its glory days. And the Utah investigative body that handles stock frauds says it has gotten complaints but they didn't think any of them were worth investigating. The fact that they are asked to give such a statement tells you plenty.

Here is a snip from that part of the article:

"Blake Stowell allows that BayStar's demands, and the publicity sparked by them, 'has caused market uncertainty and pushed the stock price down. [That] has been disappointing to any investor in our company.'

"Stowell took some comfort in a Thursday-Friday rebound of 15.4 percent as shares ended the week at $7.85. While still a long way from SCO's $20.50 per share high water mark of October 2003, given April's woes the rally was welcome. 'There obviously were a lot of shares that were purchased by investors who thought we were at an attractive price,' he said.

"Such fluctuations in SCO's trading, however, also have generated speculation in the pro-Linux 'open source' community -- a global network of programmers dedicated to keeping Linux a freely distributed operating system -- about purported stock manipulation.   Several calls have been fielded by the Utah Division of Securities about SCO, but none were deemed worthy of formal investigation at the state level. 'We sent those [inquiries] on to the U.S. Securities and Exchange Commission office here in Salt Lake City,' said Michael Hines, Utah's director of securities enforcement. 'But we are not aware of any state violations at this time.'

"Kenneth Israel, district administrator for the SEC in Utah, is aware of the 'buzz on the Internet' about SCO's stock. Policy prohibits him, however, from confirming or denying whether investigations are ongoing.     SCO's Stowell flatly dismisses the allegations, saying he knew of no contacts from either state or federal securities regulators."

On investors thinking SCO is a good buy, some SCO insiders seem poised to benefit from that huge dip caused by BayStar. Here is a list of April's SEC filings on insider activity:

The new CFO, Bert Young, was granted 150,000 shares at $7.18 on April 20, 2004 "under the Company's 2004 Omnibus Stock Incentive Plan. The option vests over a four-year period commencing from the Option date."

Duff Thompson picked up 15,000 also at 7.18 on the same day. His Explanation statement:"Grant to a Reporting Person of a Non-Qualified stock option to buy shares of Common Stock under the Company's 2004 Omnibus Stock Incentive Plan. The option vests over a two-year period commencing from grant date and represents an option received subsequent to Stockholder approval and election of each Board Member to serve on the Company's Board for the 2004 fiscal year."

Fred K. Stousen picked up 15,000 at 7.18 as well.

Ditto Ralph Yarro. Ditto Dott Marcy. Ditto Daniel Campbell. Ditto Edward Iacobucci.

The $7.18 price is noticeable, because as far as I can determine, it seems to be the lowest price on the stock since June of 2003 (when the stock closed at $6.60) up until April 20, 2004. Are these guys lucky, or what? Did Bert Young not happen to hop on board on the exactly perfect day?

Here is a list of the closing price for the last 30 days. I notice that April 20, the day everybody got their options listed with the SEC, was the magic number, the stock closing at $7.18. That would indicate that instead of using the 30-day DMA, the stock was priced at the single day rate:

  •  04/22/04 -  8.250  
  • 04/21/04 -   6.800  
  • 04/20/04 -   7.180
  •  04/19/04 -   7.770  
  • 04/16/04 -  8.370
  •  04/15/04 -  9.660  
  • 04/14/04 -  10.000  
  • 04/13/04 -   10.030  
  • 04/12/04 -  10.400
  •  04/08/04 -  10.550
  •  04/07/04 -  10.710  
  • 04/06/04 -  11.450
  •  04/05/04 -   10.720  
  • 04/02/04 -   9.500  
  • 04/01/04 -   9.000  
  • 03/31/04 -   8.590  
  • 03/30/04 -   8.570  
  • 03/29/04 -   8.490  
  • 03/26/04 -   8.820  
  • 03/25/04 -   7.890
  •  03/24/04 -   7.800  
  • 03/23/04 -   7.770  
  • 03/22/04 -   8.330  
  • 03/19/04 -   8.710  
  • 03/18/04 -   8.750  
  • 03/17/04 -   8.860  
  • 03/16/04 -   8.800  
  • 03/15/04 -   8.990  
  • 03/12/04 -   9.530  
  • 03/11/04 -   9.250  
  • 03/10/04 -   9.510  
  • 03/09/04 -   10.250  
  • 03/08/04 -   11.280

SCO put out its press release about BayStar wanting its money back on Friday, April 16. On April 22, BayStar said that they'd maybe keep their money in SCO if reforms ensued.

I'm no expert, but I just look at the list. The stock tanked, predictably, on Monday, Tuesday and Wednesday and then went back up on the 22nd. During the huge dip, $7.18 was chosen as the price for Mr. Young and all the rest. There may be a perfectly logical explanation for all this all you high-finance brainiacs see. You could argue it's a coincidence, I suppose. But it looks kind of peculiar to my novice eyes. Am I missing something? I may be, but I present the research so others who do understand these things better than I do will have the data handy to add to their own.

Melanie Hollands has her Part 2 on SCO stock's ups and downs here.


  


SCO Responds to BayStar: We're Keeping Your Money and Our Business | 255 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: gnutechguy99 on Sunday, April 25 2004 @ 12:27 PM EDT
I suspect that these guys at SCO are old pros at this stock timing stuff. I
personally find it very hard to believe that events just happened to work out so
that the board could vote itself some more printed money.

Just more little items the SEC can look into.

Just my .02 dollars but I am not astock analyst or a lawyer

[ Reply to This | # ]

Corrections here please
Authored by: Anonymous on Sunday, April 25 2004 @ 12:27 PM EDT
Pleasr report typos and corrections here.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Sunday, April 25 2004 @ 12:38 PM EDT
Blake Stowell allows that BayStar's demands, and the publicity sparked by them, 'has caused market uncertainty and pushed the stock price down. [That] has been disappointing to any investor in our company.

No, that has been disappointing to any speculator who currently has a long position in SCOX, and is thus worried that they might not get to cash out soon (or ever).

We in the post-dot-com era remember what investors are again, don't we? I hope we haven't forgotten again already; most of the NASDAQ bubble came from public failure to understand the difference between speculators and investors. Investors are the people who buy a stock because they expect the company to make a profit and use that profit to pay dividends or repurchase their own shares. To any investor in SCO (if such a thing exists), a dip in the current share price just means they can pick up more shares of that $50 billion dollar payoff when SCO's wildest dreams come true in court. The only people who might be hurt by the stock price dips are speculators, who are willing to buy a stock at a stupid price because they expect to find some later who will buy it at an even stupider price, and who don't want to be the ones left holding the bag after the price peaks at stupidest.

[ Reply to This | # ]

Insiders are selling!
Authored by: Anonymous on Sunday, April 25 2004 @ 12:47 PM EDT
From reading this article I got the impression that insiders are buying the stock at these low prices. Which is as far from the truth as it gets. They are being granted options to buy SCO stock a year from now at $7.18. Basically they are being handed funny money. None of the insiders have bought any shares recently. They didn't even buy them when the stock was at $1.

Here is an interesting insider sales graph for past 12 months:

http://part ners.thomsonfn.com/stock_gifs/S-Z/SCOX_INSIDER.gif

The red arrows are sales by insiders and blue are purchases. Notice how there are no blue arrows.

That should show you the confidence level the SCO insiders have in this stock.

[ Reply to This | # ]

SLT Article
Authored by: jmc on Sunday, April 25 2004 @ 12:49 PM EDT
That picture of Darl in the SLT article - he doesn't look quite as clean-cut and
carefree these days!!

Would you buy an (increasingly little) used operating system from that man?

[ Reply to This | # ]

Suspicious of course..
Authored by: Anonymous on Sunday, April 25 2004 @ 12:51 PM EDT
I really wonder what their accountants have to say about this.. Issuing options
at a big stock dip does NOT seem to be in the interest of the shareholders.

[ Reply to This | # ]

Shades of Enron at MarchFirst
Authored by: Anonymous on Sunday, April 25 2004 @ 01:01 PM EDT
The following research reposted from a Yahoo Finance post: http://tinyurl.com/33ufz


"Shades of Enron at MarchFirst" That's the title of a scathing article at VARbusiness. See: ht tp://varbusiness.com/sections/news/dailyarchives.asp?ArticleID=33695

That article's subtitle is: "Bankruptcy court filing reveals mismanagement and deception" that just about says it all, but read it for the juicy details.

Bert Young (the new CFO at SCO) was CFO at MarchFirst in this period. The Bankrupcy trustee filed papers on his dishonesty.

Please note that Marchfirst sold many of its assets to the Salt Lake company, SBI, just prior to filing for bankruptcy. SBI is where Darl was a executive between IKON and FranklinCovey. Ty Mattingly is still the VP at SBI for Mergers and Acquisitions. Ty Mattingly is described as Darl's "close friend" in several clippings. Ty was director at Vultus (a Canopy firm) at the time of the SCO acquisition, and has SEC filings from November 2003 for the SCO stock he recieved.

Was the Marchfirst-SBI deal a sweetheart arrangement, to deliver assets to the Salt Lake crowd just before bankruptcy? Has Bert Young been rehabilitated after being implicated in serious malfesance at Marchfirst?

Young's next company talk2.com got funding from BlueVector Partners. Bluevector is the shell corporation specifically mentioned in the bankruptcy charges as the deceptive financial transaction for booking revenue.

A humorous aside: talk2, the failed .com that Young was CFO at in Salt Lake after Marchfirst, has naturally gone to the graveyard. Dave Morton, its founder is now selling "magic all-natural fertilizer" on the web. I kid you not, you too can buy premium Utah BS from these folks. http://www.fertileearth.com/abou t_us.htm

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Sunday, April 25 2004 @ 01:08 PM EDT
Options grant is a very common trick most public companies used as incentives to
management. All it takes is the board of directors to approve a stock option
plan, which they often rubber stamp it. Then the management is free to choose
the timing. Obviously for the management's benefit, they can choose the option
grant date when the stock is really cheap.

In the past, such grant has no impact on their financial statement (see
accounting standard APB25). New rule (FAS 123) will make the "value"
of such options recorded as expense. But no matter how it is accounted, it is a
non-cash expense, and it is often excluded from earning per shares calculation.

That goes back to whether the share holders rights or benefit are protected.
Under the public company concept (I think it is called the agency theory), it
rests on the board of directors. But in most cases the board is so close to the
management it is like asking the wolf to guard the hen house.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Sunday, April 25 2004 @ 01:15 PM EDT
SCO Responds to BayStar: We're Keeping Your Money and Our Business
I say, Good for them!

Dispite the fact that SCOG doesn't have the law or the facts on their side, the last thing we need is competent company executives and lawyers on their side to confuse and drag things out even further.

[ Reply to This | # ]

How would SCO get rid of Darl, anyway?
Authored by: Jude on Sunday, April 25 2004 @ 01:26 PM EDT
Even if SCO wanted to heed BayStar's advice, I'm not sure how they would go
about getting rid of dear Darl. Darl would almost certainly respond by suing,
which would add even more litigation expense to SCO's overfull plate. Even
worse, Darl might be privy to information that might be very damaging to the
real puppet masters, and I'm sure he would try to "monetize" such
knowledge if he was cornered.

Just demoting Darl but letting him keep his salary wouldn't work. Darl's ego
wouldn't let him accept such a situation, and letting him keep his handsome
salary wouldn't satisfy BayStar.

SCO may have a bit of a problem on their hands.

[ Reply to This | # ]

Don't forget the buy-back
Authored by: rand on Sunday, April 25 2004 @ 01:28 PM EDT
Let us not forget that the stock buy-bac k plan is specifically aimed at employee shares. That's the other half of this smelly business.

---
carpe ductum -- "Grab the tape" (IANAL and so forth and so on)

[ Reply to This | # ]

Is there any truth?
Authored by: colnago on Sunday, April 25 2004 @ 01:30 PM EDT
I dont get the SLT article, in the picture it says Darl is the chairman and the
CEO, but I always thought Yarrow was the chairman. What gives?

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: leguirerj on Sunday, April 25 2004 @ 01:30 PM EDT
Now it makes sense why SCO issued the press release in the first place. The
stock decrease was consequence of them making the press release, nothing else. I
wondered why a company would issue a press release that would cause their own
stock to decrease.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: blacklight on Sunday, April 25 2004 @ 03:11 PM EDT
It sounds like a plot of a bad Western: a crooked would-be sheriff (Darl
McBride) and his hand-picked deputies (SCOG's top management) tries to take over
the town with the help of an amoral banker (Baystar) and the editorial support
of the local sleazebag press tycoon (Rob Enderle). Unfortunately, a US Marshall
(IBM) is in town and a tough, no-nonsense, honest judge (Judge Kimball) has
taken over the local courthouse.

And out in the street, Sheriff McBride and his deputies are too intimidated to
confront the Punishment ranch's ranchwoman PJ and her cattle crew, otherwise
known as the Punishers (groklaw). You see, sheriff McBride was conspiring with
the corrupt local judge (Heise) to nullify the property deeds of the ranches
(the Linux community) around the town, and in particular to seize the valuable
water holes (our IP).

Stay tuned for the rest of the story.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: eric76 on Sunday, April 25 2004 @ 03:14 PM EDT

"Back in the '90s, SCO was a company with more than $250 million in revenue," Stowell says. "We firmly believe that with our Unix product upgrade plans and new product introductions, with the licensing opportunities that exist for Unix source code [and] Linux, that SCO can definitely return to its glory days."

Note the clever way of referring to another company in the 90s and his company now and trying to fool people into thinking they are the same thing.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: myklgrant on Sunday, April 25 2004 @ 03:30 PM EDT
"Our company has never been in a better position..."
Darl is truly the (re)incarnation of the Iraqi Information Minister. And a never-ending source amusement.
Michael

[ Reply to This | # ]

What a picture!
Authored by: avdp on Sunday, April 25 2004 @ 03:44 PM EDT
That picture on the Salt Lake Tribute has got to be the most unflattering
picture of macbride i've ever seen. Change the background to white, and make
him hold a little sign, it would look EXACTLY like he was being booked in
prison. That face does not look like a happy camper...

[ Reply to This | # ]

Employee issues
Authored by: Cal on Sunday, April 25 2004 @ 04:11 PM EDT
Hhhmmm... In Sontag's statement to the court he says that they have had to pull
engineers off their core business to analyze code for the case, and yet here
McBride says that 95% of the company is focused on the legacy business and that
major releases are due anytime. Is it me, or does something not add up? How
many programmers does TSG have, anyway? Of course, there is the possibility
that those engineers will now be using their "residual knowledge" of
AIX and Dynix as they ready TSG's next release...

[ Reply to This | # ]

Does this look interesting?
Authored by: inode_buddha on Sunday, April 25 2004 @ 05:44 PM EDT
Note the SEC tie-in:

K. Fred Skousen, Ph.D., CPA, has served as a member of the Company's Board of
Directors since June 2003. He is Advancement Vice President at Brigham Young
University. Previously, he was Dean of the Marriott School of management and
Director of the School of Accountancy at BYU. He earned a Bachelor’s degree from
BYU and Master’s and Ph.D. degrees from the University of Illinois.

Professor Skousen has been a consultant to the Financial Executive Research
Foundation, the Controller General of the United States, the Federal Trade
Commission, and to several large companies

Skousen has been a visiting professor at the University of California, Berkeley,
and University of Missouri, as well as a faculty resident on the staff of the
Securities and Exchange Commission and a faculty fellow at Price Waterhouse
& Co. Dr. Skousen has received several teaching and research awards,
including the Distinguished Faculty Award in Business at the University of
Minnesota and at BYU, the Karl G. Maeser Research and Creative Arts Award at
BYU, the National Beta Alpha Psi Academic Accountant of the Year Award, and the
UACPA Outstanding Faculty Award. In 1983 Dr. Skousen was awarded the Peat
Marwick Professorship at BYU. He held the J. Willard and Alice S. Marriott Chair
in Management at BYU from 1989-1998. In 1998 Dr. Skousen was appointed BYU
Advancement Vice President.

Dr. Skousen is the author or co-author of more than 50 articles, research
reports, and books, including: An Introduction to the SEC, Intermediate
Accounting, Accounting: Concepts and Applications, and Financial Accounting. He
served as Director of Research and a member of the Executive Committee of the
American Accounting Association from 1974-76 and is a member of the American
Institute of CPAs and is past-president of the Utah Association of CPAs.

---
"When we speak of free software, we are referring to freedom, not price." --
Richard M. Stallman

[ Reply to This | # ]

Does SCOs statement open it to litigation?
Authored by: Anonymous on Sunday, April 25 2004 @ 06:06 PM EDT
SCO, in its press release, states that it is the owner of Unix. Does this mean
that, if SCO looses its lawsuit against Novell, SCO shareholders can sue for
misrepresentation of the facts?

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Nick Bridge on Sunday, April 25 2004 @ 08:24 PM EDT
Is it just a coincidence?

1. Stocks go up and down with news - especially SCOX
2.. News about SCO Group has in the past been coming directly from SCO Group,
but more recently the majority of news has come from other sources, including
SCO overseas.

[ Reply to This | # ]

Progress at last.
Authored by: Anonymous on Sunday, April 25 2004 @ 08:40 PM EDT
'We sent those [inquiries] on to the U.S. Securities and Exchange Commission
office here in Salt Lake City,' said Michael Hines, Utah's director of
securities enforcement.

Sounds like bad news for SCOG to me.

[ Reply to This | # ]

  • Or pass the buck (n/t) - Authored by: Anonymous on Sunday, April 25 2004 @ 09:40 PM EDT
  • Nah - Authored by: Anonymous on Sunday, April 25 2004 @ 09:46 PM EDT
Observations on the Mims article
Authored by: Anonymous on Sunday, April 25 2004 @ 10:05 PM EDT

``... among them one seeking up to $50 billion from IBM for alleged misappropriation of SCO's proprietary Unix code in Big Blue's distribution of the Linux operating system.''

Um, just where can I get a copy of IBM's Linux distribution? This is not the first time I've seen articles containing this. Wonder where this misconception arose?

Then ol' Darl sez:

``"Our company has never been in a better position and we've never been more committed to our Unix business," he said. "We are preparing major updates of our products. . ..."''

Has anyone seen a roadmap (proprietary software companies are so fond of their roadmaps. :-) ) of SCO's new features? Is there anything truly new being added to the SCO product line by SCO? Or is a new version of Samba out?

``Chad Robinson of the Robert Frances Group is decidedly more brutal: "Under no circumstances would I suggest that anybody invest in SCO at this time."''

Whoa! Wasn't the Robert Frances Group on the other side of the mud pit in the SCO/IBM tog-of-war? Did they switch sides? Or am I thinking of the wrong crew?

And, finally, how refreshing to see an article that didn't have to quote the comedy team of Didio and Enderle!

[ Reply to This | # ]

OT: Middleware allegedly runs MS apps on Linux
Authored by: Tim Ransom on Sunday, April 25 2004 @ 11:18 PM EDT
Link

'David is the virtual Holy Grail in OS Technology -- it is a Windows compatibility middleware, which will enable all major Microsoft Windows applications to run on the free and open source Linux OS.'

Hmmm...'all major Microsoft Windows applications'? I wonder about the minor ones.

---
Thanks again,

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Phil Karn on Monday, April 26 2004 @ 01:53 AM EDT
I think it would be very unusual for an insider to buy his own company's stock on the open market, or by any means other than exercising an option.

Most insiders of successful companies with stock option and stock purchase plans have too much of their total net worth tied up in their own company's stock and are looking for opportunities to diversify. They'll usually do this over time to minimize the tax hit and to average the selling price. So stock sales -- even big ones -- by insiders are expected and common.

I don't know how the SEC would view it, but I for one would definitely raise my eyebrows at any move by a company insider to buy his own company's stock on the open market.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: kbwojo on Monday, April 26 2004 @ 03:02 AM EDT
Reading Mim's article I see that SCO has some great plans for themselves in the
future. To help them celebrate I made a parody press release for them.

SCO would like to invite you to join Autozone and Daimler Chrysler in our First
Annual Customer Appreciation Day. We will be revealing the upgrades to our
software products and unveiling our newest product, Code named "Lawsuit in
a box", So grab your Corporate checkbook and join the festivities today.
Remember at SCO your not just a customer, your a potential defendant.

[ Reply to This | # ]

SCOG's court dates
Authored by: Thomas Frayne on Monday, April 26 2004 @ 03:03 AM EDT
I sent the following to Bob Mims in response to his "Double whammy for
SCO" article in The Salt Lake Tribune,
http://www.sltrib.com/2004/Apr/04252004/business/160190.asp

Are there any dates that are missing or incorrect? I found the 20 day deadline
in the Rules of Civil Procedure, but I am not sure that it applies in this
case.


Dear Mr. Mims:

SCOG talks big in interviews with the press, but all substantive court decisions
have, so far, gone against it. SCOG's only successes in court are related to
its efforts to delay the progress of the cases, but the delay is rapidly coming
to a close.

Consider the following dates:

April 19. SCOG sent discovery materials to IBM. We won't know what they are
until IBM does something: motion to dismiss? memorandum of what is missing?

April 23. SCOG to respond to IBM's Amended Counterclaims.

April 30. IBM to respond to SCO's Motion to Amend the Scheduling Order.

May 3. Both SCO and IBM are to file additional memoranda with the Court
addressing the impact, if any, of the second amended complaint and IBM's
subsequent answer on IBM's Motion to Strike the 5th, 15th, and 19th Affirmative
Defenses asserted by the SCO Group in its Answers to IBM's Amended
Counterclaims. IBM goes first by May 3. SCO responds within 15 days, and IBM
replies within 7 days.

May 10. Redhat's motion for reconsideration of the stay was filed April 20. If
the time to respond, as I believe, is 20 days, SCO has until May 10 to respond.

May 11. SCOG, Novell to appear for oral arguments on Novell's motion to dismiss
and SCOG's motion to remand.

May 13. Assuming 20 days, this is the deadline for a response to two motions
from Autozone filed on April 23.


I think that the most important things to watch for are IBM's next motions and
responses, and the results of the May 11 hearing. I expect that the news from
the courts will continue to be bad for SCOG, and will worsen over the next two
months.

[ Reply to This | # ]

Interesting who didn't get new options
Authored by: crs17 on Monday, April 26 2004 @ 03:16 AM EDT
Notice that, from at least what's shown here, Darl didn't get any new options.
As of a few days ago, Baystar started breathing down SCO's neck for them to
install new management. Judging from this payout, perhaps Darl, and Darl alone,
will be sacrificed to Baystar. While Darl certainly deserves to lose his job,
he's not alone in culpability for this scheme. Are the rest of the SCOundrels
expecting to stay around?

[ Reply to This | # ]

OT: Status of SCO-related cases=?
Authored by: Anonymous on Monday, April 26 2004 @ 03:37 AM EDT
Is there any news about SCO/MS/IBM/Novell/Red Hat/? Any latest developments?
Thanx.

[ Reply to This | # ]

Of course they're selling, but not for the reason you think
Authored by: crs17 on Monday, April 26 2004 @ 03:48 AM EDT
The whole scheme of paying people in options discourages stock buying. As long
as the options aren't expiring (and none of the SCO options will expire for many
years) there is absolutely no incentive to buy and hold stock, no matter whether
you believe the stock will go up or down. (This is true in any company, not
just SCO).

If you think it will go up, you hold the options until you feel the stock has
peaked and then you convert the options to stock and immediately sell. If you
believe the stock will go down, you convert the options to stock now and
immediately sell the stock.

As soon as you convert the option into stock and hold that stock, you have
exposed yourself to risk of real losses if the stock goes down below your option
price while your potential profit in a rise of prices is exactly the same as it
was before you exercised the options. So why hold the stock with its associated
risks when holding the options presents exactly the same set of potential
rewards?

If you work out the tax implications the potential hit of holding stock gets far
worse and the system becomes a severe disincentive for buying and holding stock.
Here's the problem that hit many people in the dot.bomb era. Let's say that
you have 10000 options that your employer gave you priced at $1. The stock is
at $20. You exercise the options and hold the stock. When you buy it the
difference between what you paid ($10,000) and the value of the stock ($200,000)
is taxed as ordinary income. That is, you owe tax on $190,000 income (or
$47,500 in a 25% bracket). Say you hold this stock, which folds, just like SCO.
Later that year you unload it at $1/share. That generates a capitol loss of
$190,000. Now imagine you've made no other stock trades that years. On your
tax return capitol losses reduce capitol gains to the extent that you have
gains, but you don't have any. Once you've exhausted your capitol gains, a
further $3000 is allowed to be used to decrease ordinary income. So the
$190,000 excess value of the stock you bought which was considered ordinary
income is reduced by this $3000.

So you owe tax on $187,000 from the exercising of the option (or approximately
$46,700). To pay this $46,700, you have the $10,000 you got from the sale of
the shares. The other $36,700 will have to come from your savings account or
some other source. You'll have lost money big time.

[ Reply to This | # ]

OT. Yahoo board.
Authored by: tintak on Monday, April 26 2004 @ 04:16 AM EDT
Does anybody know if there is a problem with the Yahoo SCOX message board?
I have been unable to get it to update from its last shown entry on 1:30pm,
Apr 23.



---
'it is literally impossible' for SCO to itself provide
direct proof' Mark J. Heise 02/06/04

[ Reply to This | # ]

OT: Rupert Goodwins - Good Article
Authored by: jaydee on Monday, April 26 2004 @ 04:24 AM EDT
Don't know if this has been posted previously. Had me Laughing...

http://www.zdnet.com.au/news/business/0,39023166,39145907,00.htm

[ Reply to This | # ]

OT: How big companies think
Authored by: Jude on Monday, April 26 2004 @ 07:31 AM EDT
There's a article on The Register about the Diebold fiasco in California:

California set to reject Diebold e-voting machines

Even more interesting is the Oakland Tribune article that is linked by the Reg article:

Diebold knew of legal risks

What got my attention was the assertion that Diebold is paying about $500,000 per month to a law firm to try to keep a lid on the mess.
I'd guess they could have hired 40 or so really good developers for that kind of money and avoided the problem entirely. But, Nooooooo......

[ Reply to This | # ]

  • M$ as usual. - Authored by: Anonymous on Monday, April 26 2004 @ 08:13 AM EDT
OT. Email retention.
Authored by: tintak on Monday, April 26 2004 @ 08:19 AM EDT
This article might be of interest in the light of the recent subpeonas etc.

http://www.theregister.co.uk/2004/04/26/email_data_retention/

---
'it is literally impossible' for SCO to itself provide
direct proof' Mark J. Heise 02/06/04

[ Reply to This | # ]

OT: Caldera's most important IP
Authored by: doughnuts_lover on Monday, April 26 2004 @ 08:19 AM EDT
From Caldera's SEC filing available here

Certain components of OpenLinux have been developed and made available for licensing under the GNU General Public License and similar licenses, which generally allow any person or organization to copy, modify and distribute the software. The only restriction is that any resulting or derivative work must be made available to the public under the same terms. Therefore, although we retain the copyrights to the code that we develop ourselves, due to the open source nature of our software products and the licenses under which we develop and distribute them, our collection of trademarks constitutes our most important intellectual property.
Found atYahoo's SCOX message board

So Caldera itself thought their trademarks were their most valuable IP. No word about copyrights.

[ Reply to This | # ]

SCO Not evil enough
Authored by: pscottdv on Monday, April 26 2004 @ 09:46 AM EDT

I find it amusing that it turns out that Baystar is not upset with SCO because of the evil it has done, but rather because SCO has not been evil enough!

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Monday, April 26 2004 @ 10:05 AM EDT
I wonder what Microsoft will come up with next to slow linux down. That is what
it looks like is happening. While all the focus is on SCO I suspect there are
other plans in offing. Would be nice to hear ideas as to what they would be.
After all isn't the Idea to protect our beloved Linux.Here is an address for an
evaluation of corporate linux in Europe conducted for Microsoft. ck it out.
http://www.quocirca.com/report_linux_adopt_2004.htm

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Monday, April 26 2004 @ 10:27 AM EDT
What a mug shot of Darl McBride in the Salt Lake Tribune! Looks like he was
beaten up by someone.

[ Reply to This | # ]

Very OT: Antidote to Darl's picture
Authored by: jmc on Monday, April 26 2004 @ 10:54 AM EDT

(PJ suggested I post this).

Those reeling in horror at Darl's recent mugshot may like to soothe their nerves with the pictures I took this morning. I'll tape the birds singing tomorrow.

Please download copies if you want.

[ Reply to This | # ]

SCO Responds to BayStar: We're Keeping Your Money and Our Business
Authored by: Anonymous on Monday, April 26 2004 @ 11:09 AM EDT
Hmmm.. Ed Iacobucci is a director of SCO, eh.. Is this the same one who used to
be IBM's Lead Architect for OS/2.. Later with Citrix??

[ Reply to This | # ]

More cluesign in the press
Authored by: Jude on Monday, April 26 2004 @ 11:19 AM EDT
An article in Computer Busines Reveiw Online:

SCO Refuses to Change Its Ways Despite Investor Pressure

The part I though interesting was:

"SCO's public announcements have also been undermined by disclosures made during the discovery period of its breach of contract and copyright case against IBM Corp. In August 2003, SCO said that it had identified over a million lines of code from 1,549 files of derivative works have been donated to Linux by Unix licensees, but in a February 2004 filing with the court it was only able to list 17 IBM AIX or Dynix files accounting for approximately 3,700 lines of code."

[ Reply to This | # ]

OT. Same old, same old.
Authored by: tintak on Monday, April 26 2004 @ 11:44 AM EDT
SCOG are trotting out the ABI file nonsense as a 'correction 'of a statement in
an eWeek article dated March 4 2004
“SCO has never presented a shred of significant evidence that there is any Unix
code in Linux.”

SCOG's answer
>"SCO has also publicly identified ABI header files that are
copyrighted, but published and generally available for viewing. Portions of
these files have been copied into Linux headers without permission." ©
2004 The SCO Group, Inc. All Rights Reserved.<

This and more can be found at:-
http://www.sco.com/company/presskit/corrections/

---
'it is literally impossible' for SCO to itself provide
direct proof' Mark J. Heise 02/06/04

[ Reply to This | # ]

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