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OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Tuesday, November 02 2004 @ 12:03 AM EST

Here's a bit of the latest Open Source Wall Street, by Dion Cornett.

***************************

November 1, 2004

SCOX falls through $3 target price

The SCO Group (SCOX: Market Perform) last week traded to its lowest levels in 17 months. We believe the sub-$3 stock is attributable to: 1) heavy selling by BayStar attempting to liquidate its recently converted position, 2) legal events largely related to the IBM (IBM: not rated) case, and 3) failure of the Company to finalize and release an agreement with legal counsel to cap expenses. On the legal front, we believe SCOX’s position was further undermined by a parade of expert witnesses, brought forward by IBM with first hand knowledge of the original AT&T (T: not rated) contracts, who provided testimony contrary to SCOX’s assertions. Recall that one of the original bull arguments for SCOX was that they had inherited broad and particularly onerous AT&T contracts. Such an interpretation now seems to be at odds with testimony provided by the signatories of these same contracts. Finally, we remain disappointed that SCOX has yet to release details of a conceptually positive agreement to cap legal expenses. We suspect that the Company is struggling to work out contingencies such as how they ensure quality legal work once cash is depleted. At least some investors have expressed concern that the preliminary wording leaves room for legal counsel to start collecting equity once the cash cap of $31 million is reached. While we maintain our Market Perform rating at current prices, our sentiment is more negative given the items above, and we do not expect a significant rebound in SCOX’s share price even after pressure from BayStar selling subsides.

MSFT letter makes the case for OSS

In an email to IT buyers last week, MSFT CEO Steve Ballmer discussed why he believes MSFT solutions are better than Open Source/Linux for companies migrating from UNIX. In spite of the obvious reach such a public statement has, we believe it will have limited impact on Open Source companies such as RHAT and NOVL, and in fact may have the opposite effect of validating Linux as a viable threat to MSFT’s business. Mr. Ballmer quoted data points including TCO/acquisition costs and security to make his case, however, with slightly more than a superficial glance at the sources Ballmer himself cited it’s obvious he selected portions of the data to make his case. Contrary to assertions in the letter, the Forrester reports state that “both Windows and four key Linux distributions can be deployed securely,” and that on certain metrics Windows wins and on others Linux wins. Aside from that, the data is, by Forrester’s own admission, statistically insignificant, as they only interviewed 5 companies. In addition, Ballmer quotes a single metric from security-tracking firm Secunia, that RHEL has 7.4 security advisories per month and Windows Server 2003 has 1.7 advisories, to prove that Windows is more secure, even though Secunia warns that direct comparison of two products on this metric is invalid, since, for example, RHEL includes numerous products that are not bundled with Windows Server. Also, on deeper inspection, of those advisories, RHEL has 0 of 92 unpatched and of those 24% were highly critical, while Windows Server has 4 of 31 unpatched and 52% highly critical, and Windows XP has 19 of 74 unpatched and 37% highly critical. And, more importantly, counts of security advisories alone do not provide an accurate comparison as one single MSFT vulnerability from this summer caused the US-CERT to advise users to stop using Internet Explorer. In our view, Ballmer’s memo simply highlights the frustration that MSFT is feeling in finding a way to compete with Linux, and if the “independent studies” are as accurate as Ballmer claims, then AOL (TWX: not rated), Amazon (AMZN: not rated), Google (GOOG: not rated), and Linksys (CSCO: not rated) - all companies that are standardizing on Linux – must be wrong in how they operate their massive IT infrastructures. We believe that pressure on MSFT is only going to intensify as Linux matures and continues to evolve faster than Windows. We reiterate our Outperform ratings on RHAT and NOVL.


  


OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs | 317 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Authored by: Einhverfr on Tuesday, November 02 2004 @ 12:19 AM EST
The fact is--

Anyone who takes Balmer's memo too seriously has already drunk the koolaid and
was not going to be convinced to use Linux even before the memo.

My own opinion is that the memo will have no real impact because it does not
offer anything new (except Martin Tailor's email address). WHy should I believe
Balmer if I am not convinced by the Getthefacts compaign anyway?

[ Reply to This | # ]

OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Authored by: afore on Tuesday, November 02 2004 @ 12:22 AM EST
This is really going to put a crimp in SCO style.

[ Reply to This | # ]

OSIA Press Release
Authored by: Anonymous on Tuesday, November 02 2004 @ 12:33 AM EST

Along the same lines...

http:/ /www.zdnet.com.au/news/software/0,2000061733,39165010,00.htm

[ Reply to This | # ]

Trolls... Here Is The Bridge :^)
Authored by: XORisOK on Tuesday, November 02 2004 @ 12:37 AM EST
Spend your time here - You will get more fun...

---
I can't help it if you insist on using logic!

[ Reply to This | # ]

OT: Karate Bob?
Authored by: Anonymous on Tuesday, November 02 2004 @ 12:39 AM EST

Check this out:

http://karatebob.com/

Nice catch by the amazing stats_for_all. See Yahoo! SCOX board, messages 201726 (and 201757!). Interesting stuff.

[ Reply to This | # ]

Dion upgraded SCO on Aug 16th
Authored by: cheema on Tuesday, November 02 2004 @ 12:40 AM EST
Dion was able to spot SCOX as a bad investment early on and recommended that
people short SCO stock. Then on Aug 16th when stock had come down from its
highs of $22 to $4 he recommended that people cover their shorts. In hindsight
that seems like a misstep as the price has continued to fall and is currently
below $3. I believe the market perform rating is a mistake and my guess is that
SCO stock would be delisted within a year and Dion's $3 price target is not
justified.

[ Reply to This | # ]

some thoughts on SCOX
Authored by: Anonymous on Tuesday, November 02 2004 @ 12:43 AM EST
With no cap on legal expenses, SCO will bleed to death.
Can’t wait to see this quarters results.
My understanding is that Baystar can only sell 10% of the average daily volume
for the past five days. With SCOX’s current volume, that “pressure” will be
around for a while.
“legal and management concerns;” I wonder how much that legal advice cost them?
Dennis

[ Reply to This | # ]

O/T
Authored by: Anonymous on Tuesday, November 02 2004 @ 12:47 AM EST
I heard that prosco.net/scoinfo.com wasn't go up for real (maybe never), so I
decided to take a look and see what that's all about. It's a single page which
links to SCO's ibmlawsuit and novell pages. Just for kicks, I clicked on the
novell link. Now please help me out, because I haven't been following this from
the beginning, so I may not have all the facts.

SCO's novell page says that "On September 19, 1995, The Santa Cruz
Operation purchased specific intellectual property assets from Novell;
specifically," and then it goes on to list all UNIX and UnixWare
(everything the universe has even seen or heard relating to both UNIX and
UnixWare). Now, I understand this is oldSCO and not TSG. However, I thought
I've been seeing some stuff going around recently saying that oldSCO didn't have
the cash to buy both UNIX and UnixWare, so they only bought UnixWare.

Please forgive my ignorance, but what am I missing?

[ Reply to This | # ]

OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Authored by: rp$eeley on Tuesday, November 02 2004 @ 12:51 AM EST
The handwriting was on the wall quite a while ago folks. Hope you got out (if by
some chance of fate you found yourself in) while the gettin' was good. If not,
time to take your knocks. Anything is better than zero.

[ Reply to This | # ]

Thank you, Microsoft
Authored by: jiri on Tuesday, November 02 2004 @ 01:06 AM EST
You don't even need the "more than a superficial glance"; no doubt many people just quickly skim the first sentence before deleting the thing, which already poses an excellent question: Does an open source platform really provide a long-term cost advantage compared with Windows?

Really, what better advertising for Linux?

(BTW, here's my take on an early draft of the OSIA release...)

Jiri

---
Please e-mail me if you reply, I usually read with "No comments".
jiri@baum.com.au

[ Reply to This | # ]

OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Authored by: Greebo on Tuesday, November 02 2004 @ 01:30 AM EST
I hadn't realised SCOX never finalised that agreement with their lawyers.

I'd thought it was all agreed, but ten this is lawyers were dealing with, and Darl's probably finding it a bit harder to fud them than he did the general Tech Press.

Didn't someone have to calculator somewhere for working out how long SCOX had left at the current rate of cash bleed?

---
Greebo

------------------------
PJ has permission to use my posts for commercial use.

[ Reply to This | # ]

Slightly OT - IE comment
Authored by: PeteS on Tuesday, November 02 2004 @ 02:37 AM EST
Dion Cornett wrote

And, more importantly, counts of security advisories alone do not provide an accurate comparison as one single MSFT vulnerability from this summer caused the US-CERT to advise users to stop using Internet Explorer.

There is a Story at Yahoo news about this issue, and losing share to FireFox.

Headline

Internet Explorer Takes Another Market-Share Hit

Talks about IE losing share to FireFox pre 1.0 launch.

PeteS

---
Artificial Intelligence is no match for Natural Stupidity

[ Reply to This | # ]

OT : Enderle Comments
Authored by: Greebo on Tuesday, November 02 2004 @ 04:16 AM EST
Bob Mims has a story in the Salt Lake Tribune reporting on SCO's inability to follow up on all the hype about the web site.

At the end of quotes Rob Enderle :

However, Rob Enderle, a San Jose, Calif.-based industry analyst, said there was no underestimating the hatred that SCO's claims have stirred in the "open source" community - a global network of freely distributed software aficionados.

"SCO remains in a battle for its very life against a one of the most powerful companies in the world and a group of 'activists' who will go to almost any length to ensure the company's efforts are not successful," Enderle said.

Hum, we can always depend upon Rob to try and spin things. The tone here is trying to make us sound like Terrorists, which i strongly resent. If he means that we will disect, analyse, and actually research things that SCO say, instead of accepting them at face value like some reporters have done, then yes, we are 'activists'; but that wasn't the inference here i think.

Greebo

---
PJ has permission to use my posts for commercial use.

[ Reply to This | # ]

Stock going back to normal
Authored by: Anonymous on Tuesday, November 02 2004 @ 04:20 AM EST
when you look at the stock price over the last 2 years, the stock price is
basically settling back to where it was in march 2003 before these lawsuits
started. When the value goes below $1 then we can start getting the party ready
as then SCO will be values at its lowest level in atleast 5 years.

[ Reply to This | # ]

Wall Street Gets It
Authored by: Cyberdog on Tuesday, November 02 2004 @ 04:24 AM EST
What's happening to the world? Firstly a judge Gets It about the DMCA and
Lexmark; now Dion Cornett Gets It about Microsoft. And PJ gets Groklaw
nominated!

... Just waiting to see which way the American election goes ...

[ Reply to This | # ]

OT: US Federal Election thread
Authored by: Anonymous on Tuesday, November 02 2004 @ 05:59 AM EST
Please place all materials relating to today's election here. Be on your best
behaviour!

[ Reply to This | # ]

Corrections thread
Authored by: spuluka on Tuesday, November 02 2004 @ 06:27 AM EST
(T: not rated)-->(AT&T: not rated)

---
Steve Puluka
Pittsburgh, PA

[ Reply to This | # ]

  • T is correct - Authored by: snorpus on Tuesday, November 02 2004 @ 06:51 AM EST
    • T is correct - Authored by: Anonymous on Tuesday, November 02 2004 @ 02:10 PM EST
OS Wall Street - I couldn't resist this old rust from Forbes.
Authored by: Brian S. on Tuesday, November 02 2004 @ 06:45 AM EST
"What SCO Wants, SCO Gets
Daniel Lyons, 06.18.03, 12:00 PM ET "


"In other words, like many religious folk, the Linux-loving crunchies in
the open-source movement are a) convinced of their own righteousness, and b)
sure the whole world, including judges, will agree.

They should wake up. SCO may not be very good at making a profit by selling
software. (Last year the company lost $24.9 million on sales of $64.2 million.)
But it is very good at getting what it wants from other companies. And it has a
tight circle of friends."

"These guys in Utah are no dummies. The crunchies in the Linux community
should be paying more attention."

http://www.forbes.com/2003/06/18/cz_dl_0618linux.html

You've got to read it all.
And I thought I had a problem cause I believe in the tooth fairy.

crunchies? I tried wikidedia, no good. How about this?

http://www.uwesu.net/fx/articles.php?uwesu=P21AGIFM5UZ41F74SO72&action=view&
amp;&ss=1&id=189&uwesu=GTIWYO1G3M7MHCFFTDQ0

mars bars anyone?

Brian S.

[ Reply to This | # ]

OT: OpenSource analysis by ITAnalysis.com
Authored by: Anonymous on Tuesday, November 02 2004 @ 08:35 AM EST
See here .

I agree with most of the analysis and it seems to me refreshingly different from the more "religious" opinions, which you find all over the web (including PJ sometimes, when it comes to FOSS).

Not that I have anything against religious beliefs, btw, but I don't use them as a base to my decisions :-)

TToni

[ Reply to This | # ]

Does Baystar have inside information?
Authored by: rao on Tuesday, November 02 2004 @ 08:43 AM EST

Is it true that while Baystar was still a preferred stock holder, that they were privy to details about SCO's "evidence"? If so, then the fact that they are dumping the stock should be telling the world all they need to know about SCO's prospects.

I can understand why people are selling SCO stock. But for them to sell, somebody has to be buying. Who are these people?

[ Reply to This | # ]

Bull arguments?
Authored by: Anonymous on Tuesday, November 02 2004 @ 09:19 AM EST
"Recall that one of the original bull arguments for SCOX..."

Shouldn't that read "from SCOX?" I know, I know. Dion means
"bull" in the financial sense, but I am still giggling like a
schoolgirl.

[ Reply to This | # ]

"Quality Legal Work"?
Authored by: bobn on Tuesday, November 02 2004 @ 09:58 AM EST
We suspect that the Company is struggling to work out contingencies such as how they ensure quality legal work once cash is depleted.

Especially since the legal work to date, while they still have money, has sucked to high heaven.

---
IRC: irc://irc.fdfnet.net/groklaw
the groklaw channels in IRC are not affiliated with, and not endorsed by, either GrokLaw.net or PJ.

[ Reply to This | # ]

HTML Mistake
Authored by: Anonymous on Tuesday, November 02 2004 @ 10:08 AM EST
The entry states "AT&T (T: not rated)" ... you might want to check
the source for a missing &

[ Reply to This | # ]

Software Products versus Public Knowledge Software
Authored by: ossworks on Tuesday, November 02 2004 @ 10:15 AM EST
Software Products versus Public Knowledge Software

As a professor of computer science, I tell my students that they are on the cusp of a true software revolution. I tell them that Linux will replace Microsoft Windows. And if MS Windows is still on computer desktops in ten years, they can come back and see me and I will pay them $100! How can I be so certain about the future? Simply because a commercial product cannot compete with free software or Free software. The former "free" refers to public knowledge software that can be downloaded from the internet essentially at no cost. The latter "Free" refers to the user's ability to share the software with whomever they please.

History contributes to my sense of confidence about the future. In the 1970's and 80's the Defense Department's Advanced Research and Projects Agency (DARPA) funded the development of Berkeley Unix with a TCP/IP network protocol stack (called BSD). Since the software was public knowledge, it was shared with universities and businesses throughout the 80s and early 90s. The systematic spread of free BSD killed Digital Equipment's DECNET, IBM's SNA, Xerox's XNA and other's products by homogenizing computer network protocols to the extent that TCP/IP is today's de facto computer industry networking standard.

Today, Microsoft makes money selling two key software products: the Windows Operating System and its MS Office program suite. It creates value by providing software that no one else has. To ensure no one else obtains the software, it secures its software source code as trade secrets and, over the last two years, applied for thousands of software patents. Microsoft's primary goal is to make money, making a software product is a secondary cost center required to achieve the primary goal.

But since 1984 a bunch of programmers have been slowly implementing a Unix-like operating system. And since 1991, a thousands of internet programmers have developed and now offer public knowledge software that meets or exceeds Microsoft software functionality. If you were a software monopoly with 46 billion dollars in reserve, what would you do to counter the free and Free open source software threat to your business model and income? You probably would, and Microsoft does, treat open source software as a competing product.

This strategy works in the sense that we all are used to purchasing products and open source developers offer there software with names that sound like products, e.g., Linux 2.6 or OpenOffice.org 1.1.3. However, the phrase "Free open source software" is more correctly a summary of the thousands and thousands of individual programs (algorithms or ways-of-doing-something) that are public knowledge. Professionals use the internet to find and select items from this pool of public knowledge software, combine these ideas or expressions of ideas, and integrate this public knowledge into a new system. If they are real lucky, they may create a system that others find useful as well. Notice how this is switched compared to Microsoft goals. The primary goal is the creation of peer reviewed quality software with no secondary goal to make money. These are paid professional programmers that build and share software tools so that they may be more productive in their respective jobs.

Not surprisingly, this is also how other professions work including Law, Medicine, and Architecture. These professionals get paid for how they collect and apply their discipline-specific public knowledge to solve problems. The free exchange of ideas within these professions probably has its roots in free exchange of knowledge in scientific communities and the subsequent advances in knowledge for society as a whole.

Microsoft states that it is anti-capitalistic to share software knowledge, but one can see that professionals do it for pragmatic reasons. Free open source software exchange is an behavior that occurs among software authors. Free open source software exchange is productive, highly economical, intellectually stimulating (fun), and gives the author a strong sense of accomplishment to know that others find the software useful. To use emotional labels such as un-American and otherwise attack free open source software, reveals more about the ideological canvas of the attacker than anything about the software development practice.

Thus, the Free open source software development process has nothing to do with beating a competitor's product. So how can the multi billion dollar Microsoft force stop public knowledge? It can't.

[ Reply to This | # ]

OT: A Lurker's Request
Authored by: Anonymous on Tuesday, November 02 2004 @ 10:27 AM EST
Can a setting / query / cookie be established so that I can filter out the
massive influx of anon users that have invaded Groklaw as of late.

Most of the commentary by registered users is what I pay attention to anyway.
This will help to cut down on the signal to noise ratio and encourage people to
register for an account.

This doesn't have to be the default (although it would be nice). Just having the
option would be invaluable.

T'anks,

A Lurker

[ Reply to This | # ]

OT: Bloor almost Gets It
Authored by: sgsax on Tuesday, November 02 2004 @ 10:45 AM EST
New article here: http://www.it-analysis.com/article.php?articleid=12359
The Register ran this one today, I'm citing the original source. He has a
couple good points, and seems to start out well, but some of his bullet points
don't ring quite true with me. Maybe he's just playing devil's advocate, saying
"this is what the Enterprise Sector is thinking about Linux." It just
wasn't totally clear to me. I'll let you decide.

Seth

---
The beatings will continue until morale has improved.

[ Reply to This | # ]

OT: software patents
Authored by: Anonymous on Tuesday, November 02 2004 @ 10:49 AM EST

I just came across a lovely quote. One thought this was a new problem, but just read on:

"It was never the object of those laws to grant a monopoly for every trifling device, every shadow of a shade of an idea, which would naturally and spontaneously occur to any skilled mechanic or operator in the ordinary progress of manufactures. Such an indiscriminate creation of exclusive privileges tends rater to obstruct than to stimulate invention. It creates a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts. It embarrasses the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities lawsuits and vexatious accountings for profits made in good faith."
(Atlantic Works v. Brady, 1017 U.S. 192, 200 (1882)).

[ Reply to This | # ]

MS is at least moderately scared...
Authored by: Svartalf on Tuesday, November 02 2004 @ 12:21 PM EST
There's ads showing up on all pages of LinuxToday masquerading as a "Linux
Reference Center", but point to some of that TCO, etc. BS that Microsoft's
been bandying about- but there's no mention as to who's the source for the
"references". It's pretty much in violation of Texas' Deceptive Trade
Practices Act and I've already sent the request for them to change or pull the
ads. If they don't, I'll just file the complaint with the AG here and turn them
loose on MS.

[ Reply to This | # ]

SCO Stalls On Groklaw Counterblast
Authored by: rand on Tuesday, November 02 2004 @ 12:45 PM EST
New article by Robert McMillan at ComputerWeekly.com
A website that SCO planned to launch this week to tell its side of the story has come shuddering to a halt while its Groklaw.net rival carries on dissecting the ins and outs of the company's multifarious legal disputes.

---
The wise man is not embarrassed or angered by lies, only disappointed. (IANAL and so forth and so on)

[ Reply to This | # ]

O/T: Groklaw on google news
Authored by: maxchaos on Tuesday, November 02 2004 @ 12:47 PM EST
While I was looking around for election news this morning, Google popped up with
several links to the prosco/scoinfo non-story, for example:

http://www.computerworld.com/governmenttopics/government/legalissues/story/0,108
01,97141,00.html

[ Reply to This | # ]

OS Wall Street - SCOX Breaks $3; Ballmer Memo Boomerangs
Authored by: Anonymous on Tuesday, November 02 2004 @ 07:25 PM EST
Gasp!

Microsoft... lied?

I'm shocked, I tell you - shocked!

[ Reply to This | # ]
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