The SCO Group’s recent threat to sue Linux users who don’t buy a Unix license has caused quite a stir. However, a closer look at the company’s subsequent announcement reveals a more intriguing story. SCO claims to have entered the Web services business through its acquisition of Vultus Inc., which was facilitated using newly issued SCO stock.
This move, while seemingly straightforward, has deeper implications. SCO has been seeking ways to generate revenue since January, when it attempted to persuade Linux vendors and users to purchase Unix licenses. Their subsequent actions included suing IBM, sending threatening letters to numerous companies, and making grandiose claims about potential lawsuits against prominent figures like Linus Torvalds. Despite all these threats, SCO has struggled to sell Unix licenses.
Surprisingly, the more outlandish SCO’s threats became, the higher its stock price soared. Speculators took advantage of the rising stock value, driven by the seemingly endless stream of legal claims from the company. SCO’s stock price is now approximately ten times higher than six months ago, despite the fact that these threats are unlikely to yield substantial cash flow for years.
The legal and business sense behind SCO’s tactics is questionable at best. Their threats haven’t led to successful legal actions, with the company failing to obtain an injunction against IBM. Moreover, a German court has ordered SCO to stop threatening Linux users, and an Australian government agency is investigating allegations of extortionate behavior.
With a struggling business and diminished brand value, SCO has been using its inflated stock price as a form of currency. This tactic was evident in its acquisition of Vultus, a company majority-owned by The Canopy Group, an investment fund controlled by former Novell boss Ray Noorda. Notably, Canopy also controls SCO and several other smaller firms.
The acquisition of Vultus involved printing new stock worth around $3 million, which was then cashed out, with the majority of proceeds going to Canopy. The details of this deal were disclosed in SCO’s recent filings with the SEC. It’s evident that Canopy leveraged SCO’s stock price, fueled by its Linux threats, to generate a significant sum behind the scenes.
As long as Canopy finds ways to capitalize on SCO’s threats against Linux users, it’s likely that the threats will persist, regardless of their questionable merit.
Source: Computerworld