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How SCO Was Really Doing Just Prior to Project Monterey
Wednesday, February 15 2006 @ 06:18 PM EST

You know how SCO, in its Second Amended Complaint, tells the story of how mean IBM ruined SCO's business by walking away from Project Monterey? And how SCO's business before that was just swimming right along, doing great? And how stunned they were to learn IBM was donating to Linux? And how Linux was this hobbyist toy until IBM came along?

I think they maybe made that up. When I was scrambling around recently, trying to save vital stuff from a dying hard drive and doing triage, by reviewing some old documents that somehow I never used on Groklaw, I came across this, an article in Forbes, of all places, from 2000, "SCO Hitches Its Wagon To Linux" by Lisa DiCarlo. The way she tells it, SCO, Santa Cruz Operation, was going down fast and looking to Linux as its savior.

Here's how the article opens:

It's not often a software operating system comes along that can challenge the status quo, gain widespread popularity and create enormous revenue potential. So, it's not surprising that some struggling software companies view Linux as its ride out of the dark tunnel of flat growth and into the bright light of prosperity.

Right now, executives at SCO scoc (nasdaq: scoc), formerly known as the Santa Cruz Operation, are debating whether Linux will be its salvation.

The software maker certainly needs saving. SCO says its fiscal third quarter would fall far short of estimates. It will lose between 50 cents and 55 cents per share, not the 13 cent loss analysts had expected. The company blamed lingering year-2000 concerns and anemic demand for its flagship Unix server software, called UnixWare. Naturally, the stock was hammered, losing about 26% of its value to close at $4 on July 11. The news comes a few months after the company restructured its product divisions, laid off 70 employees and took a $5.9 million restructuring charge.

So, the company is hitching its wagon to--what else?--Linux.

Well, what do you know? SCO was struggling. Now, SCO also told us that Linux wasn't ready for the enterprise until after IBM made donations of code. Look what really happened:

Linux help can't come fast enough. With sales of UnixWare on the wane, SCO has been working for several years with IBM, Bull Worldwide Information Systems, Compaq Computer and others to develop a next-generation version of IBM's AIX Unix system. Code-named Monterey, the software will supplant SCO's UnixWare.

The problem is that Monterey was conceived well before Linux was a household word and before IBM, the primary financial backer and developer of Monterey, invested billions in a corporate-wide Linux effort which, by the way, overlaps with its Monterey initiative.

Michels acknowledges that the target audience for Monterey has changed. Instead of being a catchall Unix, Monterey will be moved upstream to a high-end, large corporate sites that now might be using Sun Microsystems' sunw (nasdaq: sunw) Solaris systems

The article clearly says that Linux was a household word by 2000, and it says IBM was simultaneously investing billions in Linux *while also developing Monterey*, which tells my rational brain that SCO knew about IBM's Linux activities at the time, and so did Caldera, if they did any due diligence at all. And if they didn't, shame on them.

My logical mind also notes that the reason SCO's Unix wasn't doing so well, according to them at the time, was "The company blamed lingering year-2000 concerns and anemic demand for its flagship Unix server software, called UnixWare."

By the time this article was written, the CEO of Santa Cruz was telling the media that Linux was so popular that plans for Project Monterey had been changed to target high-end corporate sites, instead of fulfilling its original purpose of providing a unified Unix, because by then, no one much really wanted a unified Unix. All this happened *before* Caldera bought whatever it bought from Santa Cruz, please note.

The previous March, Infoworld had done an article on SCO's difficulties:

A reorganization aims to increase investment in the company's Tarantella software and in Linux, and to reduce expenses in the company's core Unix server business. The California-based company expects to report "significant losses" after reorganization costs.

SCO is blaming Y2K-related delays "and other effects" for the shortfall, according to a statement. "I am disappointed that the market for our Unix server software has not recovered as quickly as we expected following the Y2K period," said Doug Michels, SCO's president and chief executive officer, in a statement. Michels said that reseller activity has begun to return to previous levels.

So, there you are, just in case this trial goes all the way to the damages phase, ha ha. What have we learned? That SCO wanted Linux to sell well, and it was donating code to Linux too. And according to their spokesman in 2000, they didn't care if you used Unix or Linux:

The new structure also will make it easier for each division to pursue the Linux market, Orr said. The company already has announced significant steps in the Linux market, including professional services and a version of Tarantella for Linux.

Orr said the company now intends to take portions of its UnixWare operating system and market them as layered products on top of other Unix versions and Linux. "That way, we get a bigger market for each product individually," Orr said. Programming interfaces for SCO UnixWare and Linux will be "virtually identical," he said, and added, "Increasingly, we will not care which one you use."

Orr did not say how these changes in plans and in structure will affect Project Monterey, the company's joint effort with IBM to develop a 64-bit Unix system for Intel's IA-64 architecture, and based on UnixWare and IBM's AIX technologies.

Oh, by the way, SCO might not wish to highlight this now, but in May of 2003, in a May 14 letter to "SCO Partners", Darl McBride told them Unix was selling just great:

As many of you are already aware, SCO UNIX systems continue to sell well - including an increase in OpenServer sales over the previous quarter. Our UNIX products continue to support many of the world's largest businesses. In addition, new customer sales indicate that there is still no better option for rock-solid, dependable technology for their core businesses than our SCO UNIX solutions.

So I think any fair person would have to conclude that whatever happened with Project Monterey, the impact was not eternal. Unless the May 14 letter ... well, you know. [UPDATE: Groklaw's vruz found this confirming story from August of 2000.]

This letter is another document that we didn't have on Groklaw, because it predates Groklaw by a day or so, but because we are striving for completeness, here it is for history, SCO's Dear SCO Partner letter announcing SCO was suspending all Linux activities:

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

Dear SCO Partner:

As a SCO Partner, we thank you for your support and continued business. Because you are a valued partner, it is important that we make you aware of important SCO business decisions and announcements as soon as possible. As such, we wanted to make you aware of an important announcement made today.

This communication is about recent efforts SCO has made to license and protect our patents, copyrights and intellectual property pertaining to the UNIX operating system. As you know, on March 7, 2003 SCO announced that it filed legal action against IBM in the State Court of Utah, for misappropriation of trade secrets, tortuous interference, unfair competition and breach of contract. The complaint alleged that IBM made concentrated efforts to improperly destroy the economic value of UNIX, particularly UNIX on Intel, to benefit IBM's new Linux services business.

As we have progressed in our discovery related to this action, SCO has found compelling evidence that the Linux operating system contains unauthorized SCO UNIX intellectual property (IP). Due to this discovery, we are taking three immediate courses of action.

1. The first is to send a letter alerting commercial users to the fact that legal liability for the use of Linux by businesses may extend to end users. Customers should start receiving this letter today. For your information, a copy of this letter may be found here.

2. The second action we are taking is to suspend all future sales of the Linux operating system from SCO until the attendant risks with Linux are better understood and properly resolved.

3. Finally, although this action affects future development and sales of SCO's Linux offerings, SCO will continue to support our SCO Linux and OpenLinux customers and partners who have previously implemented those products and we will hold them harmless from any SCO intellectual property issues regarding Linux. SCO will continue to honor all contractual obligations with existing customers including product updates, service, and support.

As many of you are already aware, SCO UNIX systems continue to sell well - including an increase in OpenServer sales over the previous quarter. Our UNIX products continue to support many of the world's largest businesses. In addition, new customer sales indicate that there is still no better option for rock-solid, dependable technology for their core businesses than our SCO UNIX solutions.

We are excited to be building on our SCO UNIX history as we roll out our next generation UNIX operating system and SCOx framework this fall. SCOx will allow small and medium business customers and branch offices to plug their existing applications into a Web services environment. Details of this strategy will be unveiled at SCO Forum in Las Vegas late this summer.

SCO remains committed to building new business opportunities for our partners such as you. We recognize that you have depended on us to provide reliable, solid technologies for your customers for over twenty years. We look forward to helping you and your customers meet your business needs for the next twenty years.

Sincerely,

Darl McBride
President and CEO
The SCO Group


  


How SCO Was Really Doing Just Prior to Project Monterey | 90 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Offffff Topic Here
Authored by: Anonymous on Wednesday, February 15 2006 @ 06:26 PM EST
Make Clickies Clickable please

[ Reply to This | # ]

Corrections
Authored by: Anonymous on Wednesday, February 15 2006 @ 06:29 PM EST
Should there be any.

[ Reply to This | # ]

Off topic here please
Authored by: Chris Lingard on Wednesday, February 15 2006 @ 06:34 PM EST

Please post in HTML, and put in those links in if you can; instructions at the end of the posting page. If you cannot post it anyway.

[ Reply to This | # ]

Damages at trial
Authored by: Anonymous on Wednesday, February 15 2006 @ 06:41 PM EST
Sorry but I fail to understand how SCOG's position before precludes SCOG to
assert damages.

[ Reply to This | # ]

Ransom Love's Linuxworld 2000 Keynote Speech
Authored by: NZheretic on Wednesday, February 15 2006 @ 06:47 PM EST
Ransom Love's Linuxworld 2000 Keynote Speech
In August 2000, just days after Caldera purchased the Old SCO server division, the then CEO of Caldera, Ransom Love, made a keynote speech at LinuxWorld 2000. A RealPlayer video stream of the event can be found at Technet Journal's Technetcast... http://tech netcast.ddj.com/tnc_play_stream.html?stream_id=393

In the question and answer session at the end of the keynote (44:30 minutes into the videostream), Love was asked about the possible confict over Monterey and Linux AI-64

* Mont erey.mp3: A mp3 capture of the transcribed portion

"Q: What happens about Project Monterey, because that conflicts with the IA-64 Linux, 64-bit Linux?

"Love: OK. I don't -- if we do our job right in making Linux scale over like UnixWare to the degree that everybody, that we know we can... May I ask, some people have said, "Well, people have tried this in the past, but they haven't been that successful," may I suggest: we don't have any ulterior motives for not making it successful. Technologically has not been the reason why it hasn't done it before. There's always some other motive, right? And so to talk about Monterey, clearly we want to make sure we have the same level of Linux integration on Monterey that we would have in our Unixware product. Now, we don't control, I mean, we have a great relationship... it's a joint development relationship with IBM which we intend to preserve ... but they have similar interests and so this is really a very synergistic, uh, this transaction is great for all of the major partners as they have already wanted to embrace Linux moving forward.

"Now, let me address one other aspect of your question, which is that the Monterey Project is in conflict with the IA-64 Linux Project. I don't believe it's in conflict at all. Now, clearly, we have tremendous vested interest in the IA-64 Linux Project and with the acquisition of SCO, they've been doing a lot, so you combine those, and we've got one of the more comprehensive offerings, I believe, on the IA-64 Linux. So that's clearly an area that we're very committed to. But like Unixware, there's elements of the Monterey kernel that are more scalable, OK? Now, on the IA-64 platform, I don't know how long of window that is, but today, it's a little bit more robust and more scalable than the IA-64 Linux is today. Now, I'm not saying that over time that won't change.

"But, and let me address one other thing. Sorry, (laughs) you're getting all of it through one question. But clearly we are going to add components back to the Linux kernel on both IA-32 and IA-64 platforms. We'll work with Linus and everyone in order to make that available. That will take some time. And as I mentioned earlier, I don't know that over time you can have a single kernel -- in fact I know you can't -- that will scale, you know, the breadth of IT technology needs. So I think we're looking, in the Linux community, at having multiple kernels, so...

"Q: Multiple Linux kernels? Or multiple UNIX kernels?

"Love: Multiple Linux kernels as well, over time.

"Q: Thank you.

"Love: You bet.

[ Reply to This | # ]

Monterey and Itanium
Authored by: Anonymous on Wednesday, February 15 2006 @ 07:13 PM EST

But here's another problem: Monterey's success is largely dependent on the adoption of Intel's intc (nasdaq: intc) first 64-bit chip platform upon which it will run, called Itanium. That is expected to hit the market around October. But it's a catch 22, because Itanium adoption will be very slow--a year at least....

from Lisa DiCarlo at Forbes

I'm not criticizing the tone of her story but "very slow" is polite 2000 journalist speak for the White Elephant known in the trade as the ITANIC since Dan Knight came up with the term in October 1999.

Neither SCO nor Caldera can claim to be unaware of this almost certainly fatal impact on Monterey.

It was the talk of the industry that Intel had committed itself to a disasterous design decision well before 2000.

Brian S.

[ Reply to This | # ]

How SCO Was Really Doing Just Prior to Project Monterey
Authored by: Steve Martin on Wednesday, February 15 2006 @ 07:20 PM EST

Programming interfaces for SCO UnixWare and Linux will be "virtually identical," he said,

Okay. So much for "API" nonsense. Can everyone say "estoppel"?

---
"When I say something, I put my name next to it." -- Isaac Jaffee, "Sports Night"

[ Reply to This | # ]

I can't decide if it was Darl or Ralph Yarrow
Authored by: kawabago on Wednesday, February 15 2006 @ 07:41 PM EST
Which one came up with the idea of extorting linux users I just can't decide.
Ralph is patient and coniving. He spent years gaining the trust of the
Noorda's while he patiently waited for them to become infirm so he could plunder
the fortune he knew they were setting up to care for their disabled son. The SCO
nonsense started at about the same time that he started to plunder Canopy. That
makes me think he hatched the plot and hired Darl to carry it out.

On the other hand, maybe Ralph hired Darl just to help him plunder Canopy. The
only business successes Darl has had are in courtrooms so that is logically
where he would look for fresh sources of income. So maybe it was Darl who came
up with the idea to use the UNIX assets to extort linux companies. We do know
it was Darl that first contacted Novell about joining in the scheme, but did he
hatch it?

I know it really doesn't matter, but it would be nice to know who actually came
up with idea to extort linux.

[ Reply to This | # ]

How SCO Was Really Doing Just Prior to Project Monterey
Authored by: Anonymous on Wednesday, February 15 2006 @ 07:54 PM EST
Seems many have severe short-term memory with respect to SCO... Their stock
(NASDAQ SCOX) was about $2 in 2002 and heading south prior Darl's swashbuckling
public statements that pushed SCO stock past $20 in 2003. Now trading around
$4.25, heavily manipulated and just waiting around 'till the other shoe
drops...

Would say that this would be the equivalent of an Enron, Tyco, Adelphia -- but
SCO is/was small potatoes and no one will notice Darl McBride off the streets
and in the slammer along with the other execs of failed/pilfered corporations.


[ Reply to This | # ]

Ve-eery interesting!
Authored by: Anonymous on Wednesday, February 15 2006 @ 08:13 PM EST
"...and it has already given some intellectual property to the Linux open
source community..."

Wait a sec, SCO giving up the "precious" IP? Imagine that! And look
WHY they are contributing...

"...to make it more reliable, expandable and compatible with Unix..."

Hmmm... funny, sounds kinda like what a certain company is currently suing IBM
about!

[ Reply to This | # ]

The only thing they had going on was "TARANTELLA", period... for years!
Authored by: Anonymous on Wednesday, February 15 2006 @ 08:45 PM EST
If you go to the financial filings of Santa Crua Operation you will see that as
soon as the ink was dry on the Novell deal, then suddenly Tarantella shows up!

It is no mystery that SCO UNIX was up against, Microsoft, IBM, SUN, etc... they
even say so in their filings. Competition due to "open standards".
Yep.

SO - Encouraged by the performace of Citrix on top of Microsoft, they had an
inspiration that they could do the same with UNIX, except they had no rights to
build out a product that would be free of "fees" to run on say AIX or
SUN, so they went to Novell and got a cheap version of rights, with only 5% of
revenue and became a bill collector for Novell, AND bought the limited,
copyrights-NOT, rights to Unix in order to develop a Tarantella that was free
from "derived from" language so that Tarantella could be sold legal
like on top of AIX, SUN, etc... and guess what? That was their only option!

SO - go back and do the math.

[ Reply to This | # ]

Corrections Here
Authored by: gopherbyrd on Wednesday, February 15 2006 @ 08:48 PM EST
PJ prefers the OT and Corrections threads start from a logged in user.

[ Reply to This | # ]

Hmmm... $4
Authored by: Dan M on Wednesday, February 15 2006 @ 08:56 PM EST
"Naturally, the stock was hammered, losing about 26% of
its value to close at $4 on July 11."

<adjust tinfoil hat>
Very interesting.
</adjust tinfoil hat>

[ Reply to This | # ]

Please, watch your language...
Authored by: Anonymous on Thursday, February 16 2006 @ 03:29 AM EST
Let's keep it polite...

[ Reply to This | # ]

How SCO Was Really Doing Just Prior to Project Monterey
Authored by: blacklight on Thursday, February 16 2006 @ 09:18 AM EST
Once again, IBM demonstrates why it has the strongest strategists in the
computer business: had IBM put all its eggs in the Monterey project, the result
would have been every egg broken but not a single hatchling. IBM wisely
diversified its risk by investing heavily in Linux, and Linux investment turned
up a lot of hatchlings.

SCO at the very least followed IBM's lead prior to 2003 by getting itself
involved in Linux but in MBA-speak, SCO's execution of its corporate strategy
was far less successful.

Darl the Snarl's argument that the Monterey project gave SCOG what amounts to a
power of veto over IBM's Linux strategy makes no sense from a business point of
view: IBM would never have consented to any agreement that would have choked off
its strategic options, especially those options that are crucial to the survival
of IBM as a conitinuing buisness entity.


---
Know your enemies well, because that's the only way you are going to defeat
them. And know your friends even better, just in case they become your enemies.

[ Reply to This | # ]

The company blamed lingering year-2000 concerns...
Authored by: Anonymous on Thursday, February 16 2006 @ 10:09 AM EST
Unix and Linux keep their time in a "time_t" structure, which is an
unsigned integer count of the number of seconds which have elapsed since
midnight UCT January 1, 1970. The 32-bit time_t which was widely used around
year 2000 will not rollover until the year 2106. To paraphrase Linux at the
time, "Long before then, we'll redefine time_t to be 64-bits and recompile.
By the time _that_ overflows our Sun will be a cold dark lump the size of my
fist."

Translation for the non-codeheads: Unix/Linux were not vulnerable to year 2000
problems. An application produced by a programmer who wrote his/her code in
harmony with the system would not have year-2000 problems either.

If anything, year 2000 concerns should have accelerated Unix/Linux adoption.

[ Reply to This | # ]

How SCO Was Really Doing Just Prior to Project Monterey
Authored by: blacklight on Thursday, February 16 2006 @ 10:27 AM EST
How well was SCO doing concurrent with the Montery project?

A close Italian-American friend of mine once confided to me about his failing
marriage: "I am so happy I could cry!". Likewise, if I were SCO, I'd
be saying: "We are doing so well I could throw up just thinking about
it!"


---
Know your enemies well, because that's the only way you are going to defeat
them. And know your friends even better, just in case they become your enemies.

[ Reply to This | # ]

How SCO Was Really Doing Just Prior to Project Monterey
Authored by: Anonymous on Thursday, February 16 2006 @ 01:27 PM EST
I remember that article. It was a few short months later Darl took the
helm(Maybe a year). At first alot of people thought Darl was going to make a
bullish run on getting his feet wet into the Linuz market.
You know really he did do what people felt he would. Just entirely backwards and
as destructive as possible. Instead of bringing someting to the table and
joining dinner he jumped up on the table and Hmmmm cant finish the analogy. But
if you've seen the Michael Douglas film war of the roses and remember the fish.
Well you get my point.
Could anyone really have imagined how this wouldve played out as far as the bit
parts. I mean everyone knew the end to the play already. But the scenes
themselves. Breathtaking. Oliver Stone couldn't have butchered factual content
in a more direct manner.
Bravo Darl Bravo

[ Reply to This | # ]

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