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Royce Buys More SCO Stock
Wednesday, October 08 2003 @ 07:35 PM EDT

Royce and Associates just filed with the SEC to report that it now owns a little over 10.41% in SCO, 1,441,200 shares to be exact. That's about double what they had before.

Meanwhile financial types are beginning to notice a few things, like Eric Hellweg, CNN/Money Contributing Columnist, writing about how many shares insiders are sellling:

"Senior vice president Reginald Broughton has led the pack, offloading 170,000 shares since June for an estimated gain of $1.13 million. Broughton now owns only 95,000 shares in the company.

"When I reached McBride on Tuesday at his office in Utah, he defended the executive sales as a simple case of executives finally being able to sell shares that were underwater until the recent run-up. And he argued that the amount sold is 'very small' compared with the total number of insider shares owned.

"Others, however, aren't so sure. 'I'm not going to cast moral judgment,' says George Weiss, an analyst and vice president at Gartner Research. 'But there is a sense one gets that the whole lawsuit is a means to generate revenue and quick acceleration in stock price in hopes that a buyout would occur from a deep-pocketed company such as IBM. [The selling] doesn't surprise me.'"

The SGI code comparison is having an effect on normal financial thinkers, as you can see in the article's analysis, where the author noted that 200 lines of code doesn't equal more than a million. Hey, he's a financial guy. Those guys can add:

"SCO investors need to realize that, in many ways, they're betting on the outcomes of these lawsuits. SCO has engendered so much ill will in the open-source community, it's hard to imagine the company building a sustainable business around its products if it loses these cases. . . .

"If more companies opt to take the SGI route and conduct a code-by-code comparison, investors will get a ballpark sense of the strength of SCO's claims.

"But unless a company such as IBM decides to purchase SCO -- something that could happen if IBM's internal review shows a significant amount of infringing code -- these individual vendor code comparisons will just serve as canaries for investors trying to gauge the safety of entering the deep, dark SCO coal mine."

I think we may assume that if IBM's internal review had shown that, they'd have folded by now. I have no inside info, I hasten to add. Just a brain.

Don't laugh. Not everyone gives evidence of having one. Here's an interview with SCO's Chris Sontag, in which he repeats the misappropriation charges, without being specific, naturally, right after IBM has filed with the court a demand for specifics. Just clueless about the law:

"Why have you chosen to go after Linux customers in addition to IBM?

"Sontag: SCO has really been left with no other choice but to request that commercial customers of Linux compensate SCO for our intellectual property with a license fee. The hardware vendors don't take responsibility for infringements in Linux because, technically, they aren't distributors. The distributors pass the hot potato to business end users by shielding themselves with the GPL by saying, 'This product has no warranty and no indemnification.' So now if Linux has problems, including misappropriated intellectual property going into Linux, the end users are left holding this hot potato.

"Q:Is the open source development process flawed in your opinion, with regard to intellectual property?

"Sontag: Yes, in that there is no rock-solid mechanism in place for checking in code and assuring users that this code is clean and doesn't infringe on others' intellectual property. Until that mechanism is in place, there will more than likely be problems with others' IP going into Linux. . . .

"Q: Any regrets about how this has played out? If so, what are they?

"Sontag: It's too bad that the Linux development process couldn't prevent misappropriations of Unix software code."

I'd say that hot potato is in SCO's lap now, not in the hands of end users.

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