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Tarantella Then and Now - A FUD Tale
Wednesday, February 25 2004 @ 08:23 PM EST

What happens to a company that tries to beat GNU/Linux with FUD? This is a tale with a lesson to be learned.

Let's take a look at Tarantella. Tarantella, which was oldSCO, has just announced private equity financing to the tune of $16 million, according to the Santa Cruz Sentinel. The company was delisted but they are hoping to be able to relist, they say. Doug Michels is out. They aren't listed now because they haven't filed with the SEC for several quarters:

"The company is not allowed to sell shares on the open market because it is out of compliance with regulations regarding financial disclosures. Tarantella hasnít released regular quarterly or year-end statements for investors about the last three quarters, claiming that serious financial accounting problems in a northern European office and possibly elsewhere in the company required further investigation. Under that shadow, the company has fought Nasdaq delisting. Greeley said he expected the company to finally release financial statements by the end of March."

Here is their August 13, 2003 Notification of Late Filing:

"State below in reasonable detail the reasons why Forms 10-K, 20-F, 11-K, 10-Q, N-SAR, or the transition report portion thereof, could not be filed within the prescribed time period.

"On July 24, 2003, Tarantella announced that it had discovered isolated business practices in its North European territory that required the immediate termination of certain sales personnel in the region. On August 11, Tarantella further announced that it is working with its auditors to determine any corrections that may be required, which will result in the restatement of revenue in prior quarters in fiscal 2003 for a reduction of revenue of approximately $600,000 for the 6 months ended March 31, 2003. While Tarantella is unable to timely file its quarterly report on Form 10-Q for the current quarter ended June 30, 2003 without unreasonable cost or delay, it is working expeditiously to complete its investigation and file its results for the quarter ended June 30, 2003 as well as restatements of prior periods by August 19, 2003."

And here is their February 17, 2004 Notification of Late Filing:

"As previously announced, the Company has undertaken an audit of its financial statements for fiscal 2002 and 2003. Accordingly, the Company has not completed its review of quarterly result for the period ended December 31, 2003 and is unable to quantify and discuss any significant changes of operations from the corresponding prior period. The Company cannot reasonably estimate when it will be in a position to file its Form 10-Q for the quarterly period ended December 31, 2003 nor when the Companyís external auditors will be able to complete a review in accordance with professional standards and procedures for conducting such reviews, as established by generally accepted auditing standards."

No one yet knows who the new money comes from. The report quotes Forrester Research that Tarantella has less than $25 million out of an estimated 1.5 billion server-based computing software market. They have never achieved profitability, according to Forrester.

There is an interview in ZDNet UK, with Frank Wilde, Tarantella's new CEO, who describes his plans. Here is where Tarantella is today:

"If you look at the space we are in there are some very significant trends that set the stage for us to be successful; the whole move to Linux, and the reduction in cost of broadband, are all trends that can accelerate customers using our products. . . . the challenge for us is getting re-listed. We feel that is very do-able.

"Our products are critical. One of the things we want to do with enterprise product is to market the heck out of it. Given the push by IBM and HP into the Linux world, it is important for us to get the word out. We have also established a whole bunch of partnerships."

So, Tarantella says they need to play catch up in the Linux space with the goal of getting back on their feet and relisted. What does this have to do with FUD? At one time, oldSCO had some bad things to say about GNU/Linux.

In fact, someone just sent me the url to the following SCO Benelux informational flyer (PDF) from 1999, targeted at SCO's partners and customers in the Netherlands, Belgium, and Luxemburg. Here is how they talked about GNU/Linux back then, and see if the FUD sounds vaguely familiar:

SCO and the Linux Phenomenon

UNIX is once again back on the corporate agenda. Presently you would be hard pushed to find an IT magazine that doesn't have an article about Linux, and now, rather than tacke the questions of SCO v. NT, we find ourselves having to consider this new UNIX variant. On this page you'll find some questions regarding SCO's views on Linux.

Is Linux a threat to SCO's products?

No. Linux will mainly replace Windows desktop systems to run browser and X based applications, and maybe even some office applications. Threfore SCO feels no threat from Linuix as we do not play an active role in the client space. On the server side, Linux poses so many risks which could jeopardise the future of a company, that SCO perceives no direct competiton in this area.

Why should I use SCO for commercial purposes and not Linux?

Linux at this moment in time can be considered more a play thing for IT students rather than a serious operating system in which to place the functioning, security and future of a business. Because Linux is basically a free-for-all it means that no individual person/company is accountable should anything go wrong, plus there is no way to predict which way Linux will evolve. Yes, it's free, but with the cost of an operating system being only a fraction (3-5%) of the total cost of an IT project is it really a risk worth taking?

What about support?

a) First line support will be given by certain suppliers but what if there's a problem that they can't answer? The unfortunate answer to this is nothing! . . .

b) If you submit a question on the internet you cannot be sure of getting an answer. . .

c) The solutions offered to you can potentially contain bugs or viruses which are a security hazard to your company

d) It is often perceived to be dangerous when a company uses an operating system where the source code is available on the web to the whole world -- and that includes the company employees. This could lead to unqualified personnel tampering with the code . . .

What about the Future?

The future of Linux is very uncertain....

Who is Accountable?

Nobody is accountable for Linux products, not even the Linux distributors.

Remarkable, isn't it? Happily, we know how well it worked for them and how much it stopped Linux. Not at all. So now we know how effective such FUD was for oldSCO, who as Tarantella says they are looking to Linux for their future. They are dependent on mystery money to get up from their knees, and there is another mystery about their SEC filings, or lack thereof. Computer Business Review says they are reviewing their revenue-recognition practices:

"The Santa Cruz, California-based software company had a tough 2003. It delisted from Nasdaq and launched a review into its revenue-recognition practices. However, it finished the year on a higher note with the appointment of Frank Wilde as CEO, president, and director, and the closure of a $2.75m private placement investment round.

"The company has followed that up with a new round of private equity financing, resulting in a $16.4m cash injection. Unnamed investors acquired 11,678,580 shares of Tarantella common stock at $1.40 per share, as well as warrants to purchase an additional 2,335,714 shares at a price of $1.70 per share over the next five years."

May new SCO have the same success. You might want to get the PDF just to see their picture of TUX saying he loves SCO, a creepy Orwellian touch. In case you are new, and you wonder what the answers are to the FUD, and you need more convincing than just this cautionary tale, here is a site that answered the FUD, point by point at the time. Good for them. Groklaw reader stevem appropriately says this answer deserves special notice, on whether Linux will still be there in the future:

"About its 'future': the Linux licensing and Open Source nature guarantees that it will be available twenty years or longer from now, in one way or another. Can SCO actually guarantee that it will not have gone bankrupt three years from now, taking all its products with it?"

Ganesh Prasad explains why Linux is Teflon-coated and independent from any particular vendor:

"Well, first of all, Linux is quite independent of Linux companies in a way that the market has never seen before. The fortunes of operating system and company are usually heavily intertwined--Windows means Microsoft, Netware means Novell, OS/390 means IBM and so on. But that's simply not the case with Linux. If Novell closes down, that pretty much means the end of Netware, unless another company sees fit to buy the product and keep it alive (On the other hand, Microsoft may simply choose to buy Netware and kill it!). Such things can't happen to Linux. As an Open Source operating system, Linux is Teflon-coated against the commercial failures of the companies that try to build business models around it. Commercial entities are Johnny-come-lately to Linux anyway. Linux managed without them for years, and will continue to exist even when they all disappear. In fact, companies that claim to support Linux are wrong -- Linux supports them!"

Of course, he wrote that before those clever Novell folks bought SuSE. For some modern FUD, check out Microsoft's Martin Taylor, in an interview introduced like this:

"As general manager for platform strategies at Microsoft, Martin Taylor leads the software company's charge to contain and eventually eliminate open-source technology."

I guess that's clear as to their intentions, huh? He also tries to paint Linux as Not A Problem, useful only in PDAs and supercomputers, blah blah.

AntiFUD works. What all the FUDsters neglected to evaluate in their plans is the Internet. Mysteries get solved. Truth gets out. People care about GNU/Linux.

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