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No Invoices, Deutsche Bank Comes Through Again, and SCO is "Honored"
Thursday, October 16 2003 @ 03:30 AM EDT

It seems SCO is so pleased with response to its SCOsource licensing, it doesn't need to send out any invoices. Oh, and you have until the 31st before the price goes up on those invoices they aren't sending and you weren't going to pay anyway:
The SCO Group has backed off a plan to send invoices to corporate users in order to prod them into buying licenses for their use of Linux, an operating system the company argues violates its Unix intellectual property.

In addition, the Lindon, Utah-based company has extended until Oct. 31 a deadline after which it planned to double prices for the Linux license. Previously, the company had said the prices would increase Wednesday.

"The executives have said we haven't had to do it yet," SCO spokesman Blake Stowell said of the invoice plan. "They're happy with progress in the licensing program."

SCO's satisfaction with the reaction to their licensing scheme will puzzle readers of their most recently filed Amendment No. 2 to Form S-3, which lists nobody new as having signed up.

In other news, their stock was airborne again, thanks to some buddies at Deutsche Bank, and just in the nick of time, too, since those Vultus shares were getting ready to be sold and normally, as it has been explained to me by SCO in the S-3, that sort of an event might tend to dilute value:
. . . SCO's stock surged $4.97, or 32 percent, to close at $20.50 Wednesday, after Deutsche Bank analysts Brian Skiba and Matthew Kelly initiated coverage of the company with a "buy" rating and a $45 price tag.
Why $45? Nobody but DB can figure that part out, or at least nobody I know. Why Deutsche Bank, you may ask? For the moment, I'll just list a few links you can go to and see how Canopy Group companies and Deutsche Bank have been holding hands for some time. Make of it what you will. You might want to start here, where in August DB was fined by the SEC for improprieties in the HP-Compaq merger, failing to disclose a conflict of interest. Then check out the history of Deutsche and Canopy companies here and here and here and here (where we learn that Deutsche Bank migrated to Linux itself after SCO's warning, oddly enough), and here (Altiris was another Canopy company), and here and here.

The only other analyst tracking SCO said that DB has"made a mistake":

The only other analyst who covers SCO is Dion Cornett of Decatur Jones Equity Partners, according to Thomson First Call. He has an underperform rating on the stock.

"Investing in SCO is like buying a 'lottery ticket'," Cornett said Wednesday. "I think at the end of the day, the lottery ticket is not a winner," he added. "They will not prevail in their lawsuit against IBM." ... Cornett believes that IBM fights to the death when it believes it's right, as it clearly does here, and therefore a settlement is unlikely.

Hmm. Linux. Lottery ticket. That reminds me of something.... Even if SCO could convince a jury it was right, IBM would win on appeal, this analyst says:
"I think it's a stretch to think that an appellate court is going to overturn 100 years of copyright law," he said. Cornett has a $6 price target on SCO, based on a discounted cash flow analysis.
Oh, that. The old-fashioned kind of analysis. Discounted cash flow, indeed. Of course, whoever made out like a bandit today doesn't care what Mr. Cornett thinks. The folks selling today did just fine, thanks. And as for making a mistake, well, maybe they're just playing a different game.

And as for Skiba's "analysis" that SCO could hit the jackpot, it's based in part, according to the document, on his belief that SCO, if it wins, will be able to sue millions of Linux users. Dream on. If, in some upside-down crazed legal world SCO won, nobody would use Linux any more rather than pay a dime to SCO, I'm certain. We'd all switch to BSD or the HURD or whatever new stuff those wonderful programmers come up with like magic. And SCO would be left with a legacy version of software nobody would ever touch or fix for them to time indefinite, even forever. Then they'd have two old legacy operating systems nobody wants.

Those who bought today under Skiba's analysis may end up just as mad as the class action litigants in this securities case, where, oddly enough, a report by a Brian Skiba is mentioned in the complaint. His wisdom about SCO can be tasted in this excerpt:

The IBM lawsuit and the potential for Linux licensing deals offer plenty to be excited about, while failure would render the shares worthless, in our view.

And in this report from thestreet.com, he says to watch your step:

"This is not for widows and orphans," Skiba said of an investment in SCO. "Hedge funds would be a more appropriate market to buy this stock."

Hedge funds, however, may be on the other side. Currently, almost 12% of the stock's float is short, and the days to cover short interest went up to 5.13 on Sept. 15 from 4.51 on Aug. 15.

Widows and orphans better stand clear, all right. But did they? Reuters and others reported a 38% jump, but that turned out, from all I've seen, not to have been true. But, as you know, I'm no wizard in the stock market, so I could have missed something. The highest figure I could find was 33%, but hey, this is nostalgia day, harking back to the good old days, when there was plenty of money to be made off of fools who weren't smart enough to protect their retirement years by sufficient cynicism about those Wall Street swashbucklers.

Speaking of cynicism, this tidbit:

Skiba doesn't own shares of SCO. Deutsche Bank may seek to provide investment banking services to the company.
And to cap off our cynical mystery tour, this gem, from a SCO press release today:
The SCOŽ Group (SCO) (Nasdaq: SCOX -News ), a leading provider of business software solutions, today announced its ranking -- number 75 -- on the 2003 Deloitte Technology Fast 500, a ranking of the 500 fastest growing technology companies in North America. The Deloitte Technology Fast 500 rankings are based on average percentage revenue growth over a five-year period, from 1998-2002. SCO revenues grew 5,978 percent during this period.

SCO president and CEO, Darl McBride, credits the company's increased revenue growth to a renewed focus on SCO's core UNIX business, strategic Web Service initiatives and continued commitment toward protecting its valuable intellectual property. "As a company, we've worked hard to ensure that our company is in a cash-positive position," said Darl McBride, president and CEO, The SCO Group. "It's an honor to receive this type of recognition from Deloitte."

"Attracting enough customers to maintain four digit growth over five years makes a strong statement about the quality of a company's product and its leadership," said Mark Evans, national managing partner of Deloitte's Technology, Media & Telecommunications Group. "We commend SCO for making the Deloitte Technology Fast 500 with a phenomenal 5,978 percent growth rate over five years."

To qualify for the Deloitte Technology Fast 500, a company must be a public or private entity that is headquartered in North America. The company must have a sole focus on technology-defined as any company that owns proprietary technology that contributes to a significant portion of the company's recorded operating revenues.

You might like to compare that press release with this amendment to their September S-3, which isn't up on the SEC board yet, but is on Edgar:
If the market for UNIX continues to contract, it may adversely affect our business. Our revenue from the sale of UNIX-based products has declined over the last eight quarters. This decrease in revenue has been attributable to the worldwide economic slowdown, lower information technology spending, and increased competitive pressures from alternative operating systems. If the demand for UNIX-based products continues to decline, and we are unable to develop new products and services that successfully address a market demand, our business will be adversely affected.
Decline for the past 8 quarters and you make Deloitte's Fast 500? I wonder which kind of "fast" they mean?

So there you have it folks, a very fast day in SCOville. And, no, this isn't investment advice. I'm just putting my research results in front of you, so you can understand the day's events and can follow along.

Let me guess. Could you use an antidote? Try this article about Linus (some gratuitous snottiness and ignorance on the reporter's part about rms, which is mirrored in the title of the article, but otherwise enjoyable, and Linus doesn't support the reporter's attempt to drag him into it) and while you're at Wired anyway, how about one on the open source method being used in many other areas besides software. Kind of like Groklaw, if you think about it.


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