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While We Wait, a Word From Linus and A Bit About Contingency Fees
Wednesday, September 15 2004 @ 07:10 PM EDT

No news yet from the court. While we wait, pant pant, Bloomberg has put out another story hyping the alleged impact SCO's lawsuit against IBM will have on Linux. They appear to be stuck in a time warp. It reads like stories from March of 2003. If there is one thing that can be safely said, it's that SCO's lawsuits are irrelevant to Linux adoption. Linux is going forward, because companies that have muscle and money want it to:

"For Torvalds, the suit has a bright spot. SCO's assertions have prompted companies that use Linux to defend their software, making him realize how much acceptance his creation has gained.

"'What this case has shown even at this point is how a number of companies are willing to step to the plate and say, 'We will protect our Linux use'," Torvalds said. "Not just IBM and Novell, but even regular end-users of Linux that SCO tried to harass."

You can read the story, if you are willing to tell the Dallas Morning News all about yourself.

Phil Albert has an interesting explanation on the new contingency fee, or partial contigency fee, arrangement between SCO and Boies, called "SCO's Woes: Too Late To Turn Back". Because he is a lawyer himself, Albert is in a position to explain what the new terms might mean:

"For SCO and Boies, at this point it is a case of too late to turn back now. They've already invested millions. The fact that SCO is willing to give up a potentially higher pay-off might mean it is less confident in the outcome. At some point, if it looks like the recovery will be less than the investment, everyone might decide to look for a way out by wrapping up the case."

However, I feel I must point out that the terms announced have not yet been signed, according to the latest SEC filing by SCO:

"As described in more detail in Note 10, the Company and Boies Schiller & Flexner, LLP (“BSF”) have entered into a nonbinding letter of intent to enter into a revised definitive fee agreement. The revised definitive fee agreement has not yet been completed. . . .

"Agreement with Boies, Schiller & Flexner, LLP

"On August 31, 2004, the Company announced it had entered into a nonbinding letter of intent with BSF, to revise the existing fee agreement with BSF to limit the Company’s overall future cash costs of legal fees, including accrued legal fees to BSF as of July 31, 2004, associated with the Company’s pending intellectual property litigation to a total of $31,000,000. In addition, the nonbinding letter of intent contemplates that BSF will lead the Company’s intellectual property legal efforts through the duration and completion of the pending litigation. In return for the new fee arrangement, the nonbinding letter of intent provides that the contingency fee payable to BSF and other law firms associated with any settlement or judgment award will vary on a scaled basis from 20 to 33 percent, depending on the size of the award. The revised fee agreement is subject to the Company and BSF entering into a definitive revised fee agreement. . . ."

I found this little tidbit of interest too, about the new poison pill:

"Under the terms of the Rights Plan, preferred stock purchase rights will be distributed as a dividend at the rate of one right for each share of common stock of the Company held by stockholders of record as of the close of business on August 30, 2004. The Rights Plan would be triggered if a person or group acquired beneficial ownership of 15 percent or more of our common stock other than pursuant to a board-approved tender or exchange offer or commences, or publicly announces an intention to commence, a tender or exchange offer upon consummation of which such person or group would beneficially own 15 percent or more of our common stock.The adoption of the Rights Plan had no impact on the financial statements for the third quarter or first three quarters of fiscal year 2004. However, if a triggering event occurs in the future, there may be an impact to the financial statements at the time a triggering event occurs."

And they say the company didn't buy back any shares this last quarter, compared with 290,000 shares the previous quarter. And they paid a consultant $30,000 to advise them, but I gather it didn't work out, because he is history:

"During the three months ended April 30, 2004, the Company entered into an agreement with a consultant to provide financial consulting and investor relations services to the Company.

"The agreement was for a period of three months and was renewable for additional three-month periods. The Company paid the consultant a fixed fee of $10,000 per month. As part of the agreement, the Company granted to the consultant an option to acquire 200,000 shares of the Company’s common stock at a price of $10.03 per share, the fair value of the Company’s common stock on the date the agreement was finalized. The option expired unexercised and the agreement with the consultant was not renewed."

Here's a nice look at Microsoft's "higher" math showing it is cheaper than Linux:

"A quick look at the substance behind these claims reveals that, as you would expect, the methodology and science of the analysis is mostly spot on, but some of the assumptions along the way seem to be a little unusual.

Twisted logic

For example, a common assumption is that having selected a ‘free’ operating system (although all the studies seem to ignore anything but Red Hat, hardly the cheapest option), businesses would then opt for the most expensive database solution available to humanity, rather than more reasonably-priced alternatives.

In another study we discover that application development on Windows takes less time (and therefore less money) because it’s just a more productive environment. One wonders what Microsoft itself is using, given the production delays to its Longhorn system update.

For almost all of the research companies used, the main factor that tipped the balance Microsoft’s way in terms of the total cost of ownership is staffing costs. Apparently this is because Linux solutions are harder to manage, and require more expensive people. That may be true up to a point. But multiplying flat costs for long-term projections, as many of the reports do, assumes Linux won’t continue to grow when conventional wisdom suggests it will, increasing the availability of knowledgeable staff and improving the software needed to manage it more efficiently.

I bet they didn't factor in down time for dealing with viruses, either.


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