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SCO's Conference Call and AutoZone Report
Thursday, June 02 2005 @ 01:21 AM EDT

It was an extremely short conference call, and by far the most boring, but at least they didn't kill any kittens live on air or gratuitously slander any private individuals. They announced at the beginning that they would only take questions about their "core Unix business". Blake Stowell, Darl McBride and Bert Young attended.

They increased revenues in their Unix business this quarter slightly, so they are cash flow positive in that area. They are launching their new product later this month. They made money from selling their TrollTech stock. They had lower expenses this quarter.

There were only two questions. Mr. McBride seemed a little startled that there were no further questions. Maybe the last conference call left a bad taste in people's mouths. You need a mighty strong stomach to listen to SCO these days. Or maybe nobody cares what they say any more, because it is so spun. People hate being spun.

No questions were allowed about the litigation, but they felt free to speak about it. The only thing they said about SCO v. IBM was that the Magistrate Judge ruled on IBM's motion for reconsideration, "giving IBM some relief on deadlines and some other matters," and they characterized it that she strongly reinforced her order and ordered all public and private contributions to Linux turned over. I keep telling them Linux is developed in public. Please review our article about the Linux development process, so you'll see what a wild goose chase they have the court on. Of course, the judge did something far more dramatic than rule on deadlines. She reduced the number of individuals whose files IBM needed to turn over from 3,000 to 100. Does that match SCO's description of the order? Make up your own mind. She acknowledged that when making her prior order, she was not fully informed. Heaven knows that can happen if you listen to SCO talk.

On the denial of the G2 motion to intervene, he said that the judge told the parties to take another look at sealed documents, and now, McBride said, many important documents would soon be available. One can only hope that will include SCO documents. McBride mentioned the Novell hearing on May 25th, and he said the judge took it under advisement but he said SCO is confident they'll get to do discovery. I have no idea what he bases his confidence on. They do so enjoy discovery. That brings us to AutoZone.

On AutoZone, as you'll recall, the judge gave SCO a period of limited discovery, to see if they wished to bring a preliminary injunction against AutoZone, if they felt they could demonstrate the irreparable harm they claimed.

They have decided not to try for a preliminary injunction. That is the bottom line.

But here's the SCO spin. McBride said SCO has concluded their discovery and filed a report with the court. SCO found through discovery, he alleges, "many instances of copying of programs containing SCO OpenServer code." (Keep in mind, however, that "many instances of copying of programs" isn't the same as many instances of *illegal* copying. The facts are very much in dispute.) AutoZone has now removed all of the "SCO code and proprietary information", he said, and denies all infringement and any harm. SCO is therefore not pursuing a preliminary injunction "at this time." The report does not address their claim of infringement in Linux, because of the stay, he said. However, I note that the report itself acknowledges on page 4 that "the Court did not explicitly limit discovery" to just AutoZone's migration to Linux, but SCO thought the Court indicated something like that. I saw nothing like that in the order or the hearing, but that is SCO's story and they are sticking to it.

In short, when you strip away the distracting wrapping, they didn't find anything worth bringing to the court by means of a preliminary injunction. Did you think they would?

Instead, we get more unsupported and so-far unverifiable allegations. 91 pages of PR. That's all there ever is with these folks. All hat and no cattle.

As just one example, they take AutoZone technical employees to task in the Report, saying they "admitted" that "they didn't consult copyright counsel or any counsel prior to or during" the migration process. But if you read the deposition of Bob Celmer, one of the AutoZone employees they are referring to, on page 19 of the Report, what they actually asked him was whether he knew if anyone had consulted an attorney prior to deciding to switch to Linux, and he answers, "I don't know." Why would a programmer know that? The legal department would have done that, not the technical staff. The fact that techies don't know something like that doesn't mean it wasn't done. Again, on page 20, the attorney persists, asking if an attorney was consulted to determine if migrating from OpenServer to Linux "was appropriate or legal under those licenses" and Mr. Celmer again says he doesn't know. From that, SCO's attorneys tell the judge the above spun version. Does SCO really believe no user of OpenServer is allowed to switch to Linux? If so, it might explain their business difficulties.

And on page 8, they say they found AutoZone copied two COFF files, Compx and Decompx, "which were programs that it had licensed from a third party which contained SCO code onto all 3500 of its machines located in the United States and Mexico and has been using those files since at least January 2000." Can you imagine? What a crime. They licensed some code from somebody else, binaries to boot for which AutoZone did not have the source code (for proof of that, see page 24, a portion of the Bob Celmer deposition attached to the Report) and SCO claims rights to that code. The same page of the Report also says that AutoZone thought it had not used either Compx or Decompx programs since 2003. They copied it onto all the servers, used it from 2000 to 2003, they originally guessed, without any way of viewing the code, found out some servers still had the two files on them after 2003, and bingo, a crime of great magnitude from two files that they licensed from someone else, and likely had no reason to think were infringing anybody's code. On page 26 of the Report, the deposition of Celmer again, he points out that some of the programs they found when they went looking in discovery don't even run in Linux, so they couldn't use them, even though they were still there on the servers. Some were pre-Y2K. In short, stuff nobody even knew was still there.

A visit from SCO is like being audited by the BSA, I gather. Two files from a third party morph into thousands and thousands of AutoZone infringements. And the irreparable harm from this "crime" is quantifiable as what? Anyway, they are all deleted now. SCO is so scraping the bottom of the barrel with this.

Just as a friendly reminder, do you remember the "mountain" of "infringing" code IBM allegedly donated to Linux that melted into nothingness under the cold light of the courtroom? I think I'll keep that firmly in mind as I evaluate the new claims about AutoZone, if you don't mind, particularly since they don't acknowledge any wrongdoing at all.

There have been a lot of questions, McBride said, about SCO's motives in bringing its various litigations and suggestions in the media (I believe he means moi) that SCO was offbase in bringing the court cases, but the report now shows, he claimed, that AutoZone, by its own admissions, copied their code. Except, he just told us that AutoZone said they didn't infringe. We are back in Wonderland, I guess, trying to use logic on language that isn't logical in the real world. They wouldn't discuss AutoZone in detail or respond to any questions about it, naturally.

He told everyone to obtain the documents referred to from the courts, read them and reach your own conclusions. So, here is their report [PDF and huge], the one he was referring to, with attachments. By all means read it carefully, remember it's SCO speaking, see if you can comprehend what the alleged infringement offenses are, note that AutoZone denies any offense whatsoever, compare the depositions with SCO characterizations, and then make up your own mind about SCO's claims and their validity. And here is the Magistrate Judge's Order on IBM's motion for reconsideration, so you can compare the way SCO characterized it today with the document itself. Finally, here is the order denying G2 et al's motion to intervene.

The spin didn't work with Business Week. Their headline reads: "SCO Group posts $1.96 million loss for 2Q":

The SCO Group Inc. posted a second quarter loss because of competition in the corporate server market and expenses for a lawsuit accusing IBM Corp. of copying confidential code into the open-source Linux operating system.

Lindon, Utah-based SCO lost $1.96 million, or 11 cents per share, in the three months ending April 30. That compared to a loss of $14.7 million, or $1.04 a share, for the period a year earlier.

Revenue dropped by nearly $1 million to $9.3 million, with SCO citing competitive pressure on the company's UNIX products and services for the decline. The company said UNIX remained profitable, however, and it plans to release an upgraded version June 22 after years and millions of dollars of development.

That's the story that went out on AP, and it's everywhere. So if SCO thought the AutoZone story would be the headline, they miscalculated. What everyone is reading is about a $1.96 million loss this quarter, the 5th quarterly loss in a row.

We've divied up the SCO AutoZone report into 8 pieces, all PDFs, so those of you on dialup won't choke:

The Report itself

Declaration of David S. Stone

Deposition of Bob Celmer

November 24, 2004 letter from David J. Stewart to David S. Stone -- this is the letter to compare with SCO's characterizations in its Report, in my opinion, particularly page 3:

AutoZone's IT personnel also discovered that the "Spirit" server had some OpenServer compiled programs on it because of a recent restoration of the server after a crash. Historically, this server was used as both a development server and the home of AutoZone's revision control system. At one time, each AutoZone programmer had an account on the server to develop, compile, and test programs. Several years ago, AutoZone's IT department decided to stop providing developer accounts on the Spirit computer, and the machine transitioned to serving onlly as the home for AutoZone's revision control system. Spirit recently crashed and, during its recovery, it was converted from SCO OpenServer to Red Hat Linux. All of the files that were on Spirit were loaded back onto the machine during the recovery process to make sure that a complete restoration was achieved, and this resulted in many SCO compiled programs being loaded onto the machine. These programs were located both in the RCS system and in the developer's home directories. All of these programs (1,130) were removed from the server by October 26, 2004, after copies and backups were made. . . .

Finally, we have reviewed the relevant OpenServer agreements between SCO and AutoZone. These agreements are still in place and do not include any prohibitions on AutoZone's use of OpenServer compiled code on Linux machines. Accordingly, most of the OpenServer compiled code discussed above is properly licensed, and AutoZone is under no legal obligation to delete or recompile the code. Nevertheless, because AutoZone does not need the code to be compiled under OpenServer to serve its purposes (or in some cases, because AutoZone no longer needs the code at all), AutoZone has removed or recompiled the code as a courtesy to your client and to avoid any further issue regarding these files in this litigation." From such as this, SCO would like you to draw the conclusion that they have a case.

January 11, 2005 email from David J. Stewart to David S. Stone

Excerpts of the James Greer deposition transcript

March 4, 2005 letter from Douglas L. Bridges to David S. Stone

AutoZone's Responses to SCO's First Set of Interrogatories and First Request for the Production of Documents

It may take a few moments for them all to resolve properly.

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