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The Victor Raisys Back Story
Friday, August 01 2008 @ 06:47 AM EDT

Do you, by any chance, remember the name Victor Raisys? He was a technology analyst at Soundview Technology Group, who predicted difficulties for Linux when the SCO litigation began in 2003. Here's an example:
SCO's suit has "introduced a lot of confusion and uncertainty into the Linux market, which could ... dampen some of the future growth," Victor Raisys, a Soundview Technology Group analyst, told the Raleigh News & Observer. "The SCO lawsuit raises thorny intellectual property issues, and, analysts say, poses the potential for more court battles as other companies assert rights to some of the communal code," the newspaper reported.

Guess where he worked *before* the stint at Soundview? At Microsoft, and not only that, his job was to keep an eye on Linux for Microsoft, according to Dave Winer's 1999 account:

Last week, talking with Victor Raisys, Microsoft's guy watching Linux, a heated conversation -- they were playing the "There have always been a lot of Unixes" tape for me, and I said emphatically, Linux is not Unix....

At the end of the Microsoft conversation they asked what I would do about Linux if I called the shots at Microsoft.

He's listed that same year as one of Microsoft's "Linux 10", "a team at Redmond tasked with the assignment of studying the Linux phenomena and trying to decipher a way to stop it." Is that not a little odd to you?

Here's another example of the types of things Raisys was quoted as saying when SCO first sued IBM in 2003:

A lawsuit filed in Utah last week claims that IBM integrated computer code belonging to another company into the Linux operating system, touching off speculation that the lawsuit could hurt other Linux companies, including Red Hat, the country's largest distributor of the software.

Analysts say the lawsuit, in which Utah-based SCO Group seeks $1 billion in damages from IBM, shows that Linux, a type of open-source software, has a potential Achilles' heel: intellectual property claims....

Red Hat isn't involved in the dispute, but some analysts say that the Raleigh-based company won't be able to escape the fallout.

"It's kind of irrelevant who wins the lawsuit," said Victor Raisys, analyst with Soundview Technology Group in San Francisco. "You can't take back the fact that someone has tried to claim intellectual property on Linux. The genie is out of the bottle."

On Monday, Raisys released a report aimed at investors that said the lawsuit shouldn't be dismissed as another licensing squabble. "Linux customers and vendors will be forced to consider their legal liability due to intellectual property issues," he wrote.

In short, good news for companies that sell proprietary software such as Microsoft, bad news for Red Hat, the report concludes.

Red Hat shares have fallen 6 percent since Friday, when the lawsuit was first reported. On Tuesday, shares closed at $5.51, down 4 cents.

Here's another quotation, in an article titled "Litigation Casts A Shadow Over Linux: Will Uncertainty Slow Adoption?":

Victor Raisys, an analyst at investment firm Soundview Technology Group, a market maker for Linux firm Red Hat, says, "The lawsuit represents more than just a licensing squabble between two companies or the efforts of a small UNIX/Linux company to dig into the deep pockets of IBM."

He says Linux customers will "be forced to consider their legal liability due to intellectual property issues around Linux and open-source software." Raisys says Linux clients are "struck with a lot of uncertainty" and he expects "some firms will put them (Linux deployments) on hold until they get better clarity."

While some commentators argue the simplest solution would be for IBM to buy SCO, Raisys says that's easier said than done. Given that the lawsuit claims more than $1 billion in damages, it's unlikely the shareholders would cough up their shares at the current market cap. "You won't see this thing settled for quite a while."

In 2000, incidentally, when Caldera announced it was going to IPO, Soundview Technology Group was one of the firms underwriting it, as you can see from Steven J. Vaughan-Nichols' account for ZDNet on March 2, 2000:

Like the Linux companies before it, Caldera is offering stock options at IPO prices for "friends and family", or, in Caldera lingo, "friends and business associates". The offer letters, most of which were sent out on 29 February, also went out to Linux developers. It's Caldera plan that, unlike other similar IPOs, stock options will be made available to non-US citizens who are Linux developers. Unfortunately, the offer letters -- from Wit Capital, by way of Caldera -- to US developers, specifically state that the offer is only open to American citizens. This gives the impression that non-US Linux developers cannot get onboard with this IPO. In truth, however, selected Caldera international developers are receiving separate IPO offer notices from Bank of America.

Underwriting Caldera's IPO are Bear, First Security Van Kasper, FleetBoston Robertson Stephens, Soundview Technology Group and Stearns & Co.

The plot thickens. As a side point, I can't help but remember that Bank of America was supposedly the first chosen victim when SCO was looking for an end user defendant, as revealed in the metadata of the complaint against DaimlerChrysler, which showed Bank of America as the defendant, replaced by DC at the last minute. Remember all that? My, there have been so many funny twists and turns in the SCO saga.

Stephen Shankland reported in July of 2001 that while the IPO raised $70 million, thereafter Caldera stock tanked. The story is about a Caldera SEC filing, making it possible for MTI and Tarantella to sell their restricted Caldera stock. But in passing, let's notice something about OpenServer:

Caldera laid off 32 of its employees in April. With the Unix software acquisition, the company now has 619 employees, the company said in the filing.

In its first quarter with the Unix and Linux software products, Caldera hopes to garner $18m to $20m, Bench said. Overall, though, the company expects an operating loss of about $15m to $16m.

One issue the company faces is encouraging customers of its OpenServer product, which the company is no longer developing, to migrate to OpenUnix or OpenLinux products. To encourage this transition and to make the two other products work more similarly, the company will release programming tools in the autumn, Bench said.

"As the two products are integrated, we have two or three fairly major products...that will be released this fall. We believe that solution set will give us a tremendous bridge for our current customer base to move forward on the new platforms," Bench said.

If anyone is the target of some future SCO or Spinoff-of-SCO litigation someday about OpenServer, this detail is for you.

Getting back to Raisys at Soundview in 2003, Raisys was quoted regarding Red Hat's stock:

Red Hat sells services and higher-priced versions of Linux specifically designed for corporate customers. But how far that will take them has been an area of concern for Victor Raisys, analyst with SoundView Technology Group in San Francisco, which has an "underperform" rating on Red Hat's stock.

"Educating people is fairly high on the list of marketing activities they should be engaged in," Raisys said. "But when someone makes a decision that they're going to use Linux, the question we keep asking is: Is Red Hat going to get paid?"

Here's another example, from BusinessWeek on March 3, 2003, in an article titled, "Red Flags for Red Hat":

Soundview Technology analyst Victor Raisys wrote in a Dec. 18 report: "We continue to believe that the current stock price reflects an overly optimistic view of Red Hat's ability to capitalize on the Linux opportunity." Based on estimates that it will earn 6 cents a share in its 2004 fiscal year, its forward price-earnings ratio is a lofty 92. Both Berquist and Raisys rate Red Hat underperform.

Well, the laugh's on Soundview on that. Red Hat has proven to have little difficulty capitalizing on the Linux opportunity, I'd say, despite what seems to me to be endless dissing from analysts.

Here we find Raisys asking a question at a Microsoft presentation by conference call in 2004 on Microsoft's longterm strategy planning regarding servers, and he was by then at Hambrecht:

VICTOR RAISYS (WR Hambrecht & Co.): Hi, Martin.

A quick question for you. Do you have any updated data or studies on the mean time to fix security issues that compare Windows Server 2003 versus Red Hat's enterprise offerings?

MARTIN TAYLOR: I don't have hard-core data. I'd recommend if you go up onto cert.org, they have a fair amount of that data all available. Their community seems to get upset when I say things and so you should go look on the cert.org site and you can do the math. But I don't have that data on top of my head.

VICTOR RAISYS: Great. All right, thanks.

I doubt Microsoft minded that question. To be fair, I also find instances where he spoke less than enthusiastically about Microsoft and less than totally negatively about Red Hat, and he honestly revealed that he personally owned Microsoft stock while he was at Soundview.

I'm a simple soul, and while I realize that odd coincidences do happen in life, I still can't help but notice a man, whose job at Microsoft was to figure out how to stop Linux, showing up at Soundview just when the SCO litigation began, where he mirrored the Microsoft position regarding the threat to Linux SCO represented and dissing Red Hat. In the end, what it all means I'll have to leave to others. My role is research, which I present with links so you can verify and reach your own conclusions.

Update: Raisys later (2005) returned to Microsoft, then went to Dell in 2010.


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