Verisign is, of course, the company that once had a monopoly in the
registration of .com
names. That monopoly has been broken, but Verisign is still the maintainer
of the underlying database. This job is a nice cash cow for Verisign; all
it needs to do is keep the database running, and it can extract an annual
rent from every .com
domain out there. Many
people would be happy with such a business.
Verisign, it would seem, wants more than that. So, at the beginning of
this week, the company slipped a little "wild card" entry into the
databases for .com and .net. The wild card entry
provides an answer for any domain query that does not otherwise appear in
the database; it is a default answer which now appears instead of the "no
such domain" response that came before.
What does this wild card do? If you look up something that doesn't exist,
say "scolinuxlicense.com", you'll get back an IP address (currently
18.104.22.168). If you send mail to that address, you get the world's
stupidest SMTP server (if you're bored, try a command like "telnet
bogusverisignhost.net smtp" and type five lines of random junk at it).
Web queries, however, go to the company's "sitefinder" service. There, the
user is confronted with a search engine and paid links aimed to help said
The information provided through the VeriSign Services is not
necessarily complete and may be supplied by VeriSign's commericial
[sic] licensors, advertisers or others.
In other words, it's really just another low-class domain hijacking scam.
In this case, however, there is more to it. Verisign has, by making this
change, fundamentally altered the way the Internet operates. A whole class
of diagnostic information - the fact that a given domain lookup has failed
- is no longer part of the DNS protocol when .com and
.net are involved. This change was not discussed with any of the
affected users or other responsible parties, it was simply done. Verisign
may have lost its monopoly on front-line domain name registration, but it
still seems to think it owns the underlying domains.
The change has had real consequences. For example, spam filtering which
relies on domain name existence tests no longer works. Bouncing spam with
fake return addresses now has to go through a discussion with Sitefinder's
SMTP server. The change is a generally bad idea; to have simply made such
a change without so much as a "by your leave" is an act of great arrogance.
The internet, however, is built on free software. There is already a patch
available from ISC for BIND 9 which defeats the new wildcard entries.
Linux users can find a program on this page which
uses netfilter to fix Sitefinder replies; that page also has pointers to
patches for a number of DNS servers and mail transfer agents. Verisign may
or may not decide to back down on this "service," but, since we own the
infrastructure of our net, we can fix the problem regardless - this time,
at least. Verisign's next move may not be so easy to counter.
Comments (19 posted)
is now available. These filings can often give some insight
into the internals of a company. Since SCO's actions are, currently,
somewhat relevant to the Linux community, this filing is worth a look.
What follows is our summary of the current quarterly state of SCO.
The company claims a profitable quarter, of course. Total revenue is
reported at $20 million, of which $11 million came from products,
$2 million from services, and $7 million from SCOsource. As a
result of this revenue, the company's claimed assets have gone from
$21 million at the beginning of the fiscal year (October, 2002) to
$26 million now; of that, almost $15 million is cash in the
bank. $15 million is also, of course, what the company has received
in licensing revenue from Microsoft and Sun this year.
The company has spent almost $4 million ($1.7 million in the quarter) on
SCOsource. This figure includes internal SCOsource staff along with
external legal fees. Most other expenditures are in decline; the company
spent 31% less in research and development than it did last year.
SCO laid off 35 employes - about 10% of its staff - over the quarter. It
also shut down SCO Group Ltd., a subsidiary in the UK.
Not surprisingly, ongoing litigation is an important topic in this filing.
It mentions the Red Hat suit, stating:
On or about September 15, 2003, the Company filed a motion to
dismiss the Red Hat complaint. The motion to dismiss asserts that
Red Hat lacks standing and that no case or controversy exists with
respect to the claims seeking a declaratory judgment of
non-infringement. The motion to dismiss further asserts that Red
Hat's claims under the Lanham Act and related state laws are barred
by the First Amendment to the U.S. Constitution and the common law
privilege of judicial immunity.
It is interesting to hear that "no case or controversy exists" with Red
Hat. SCO may well be restricting its options with regard to the creation
of future cases against Red Hat. The first amendment defense is
interesting; the first amendment rights of companies in the U.S. is
currently a topic of much debate - and an ongoing Supreme Court case.
Things are happening in other parts of the world:
The Australian Competition and Consumer Commission (the "ACCC") has
contacted the Company and requested information regarding
complaints it has received regarding the Company's intellectual
property claims and the Company's statements regarding the need for
commercial Linux users to obtain a UNIX license. [...]
Several entities in Germany have obtained temporary restraining
orders in Germany precluding SCO GmbH, the Company's
German subsidiary, in substance, from making statements in Germany
that disparage Linux, or entities involved in the Linux business,
or implicate Linux as infringing the Company's
intellectual property rights. SCO GmbH has received an
administrative fine of 10,000 Euro for a technical violation of one
of the temporary restraining orders. [...]
Informal letter complaints similar to those raised in Germany have
been received from companies in Austria and Poland. [...]
Pursuit and defense of the above-mentioned matters will be costly,
and management expects the costs for legal fees and related
expenses may be substantial. The ultimate outcome or potential
effect of the Company's results of operations or
financial position as a result of the above-mentioned matters is
not currently known or determinable.
The end result is that the limited countermeasures taken against the
company so far are being felt. The "risk factors" section of the filing
also has this statement:
We are informed that participants in the Linux industry have
attempted to influence participants in the markets in which we sell
our products to reduce or eliminate the amount of our products and
services that they purchase. They have been somewhat successful in
those efforts and will likely continue.
In other words, SCO is discovering the costs involved in angering its
Sun and Microsoft
Of course, SCO's customer base is shifting; a large part of its revenue
comes from exactly two companies: Sun Microsystems and Microsoft.
SCO's previous quarterly filing had noted that the "second SCOsource
licensee" (being Sun Microsystems) had received, as part of its deal, a
warrant allowing it to buy 210,000 shares of SCO stock at $1.83 each.
Subsequently, a second warrant for 12,500 shares has been issued to Sun, at
the same $1.83 price. There is still no explanation of why SCO stock is
being issued to Sun. Most software licensing agreements do not include
this sort of equity component.
Sun, which was responsible for 12% of SCO's revenue over the quarter, still
owes $2.5 million on its licensing deal. That money is to be paid by
the end of November.
Microsoft contributed 25% of SCO's revenue over the quarter. "On
July 31, 2003, Microsoft exercised an option to acquire expanded licensing
rights. Upon delivery, we expect to recognize additional revenue related
to this option." There is no further discussion of what these
"expanded licensing rights" are, or what Microsoft is paying for said
rights. Chances are, however, that this is the "Fortune 500" customer for
SCO's "Linux license" that we heard about in early August.
Vultus and Vista
The quarterly filing gives a few details with regard to SCO's dealings with
a couple of other Canopy-funded companies. In June, SCO acquired Vultus,
Inc., which is a web services business. The purchase itself required the
issuance of 167,590 shares of SCO stock, of which almost 37,000 went to
Canopy. But Vultus also owed Canopy a little over $1 million, so
another 138,000 shares of stock (worth over $2.5 million now) went in
Canopy's direction to take care of that little problem. This deal is a
significant transfer of resources from SCO to Canopy; the benefit to SCO
remains unclear, however.
We've previously looked at SCO's dealings with Vista, which included the
acquisition of $1 million in the company's debt for 800,000 shares of
company stock, now worth many times that amount. The company has also fed
the company $200,000 in other financing. The current state of that debt?
As of July 31, 2003, the $1,000,000 convertible note receivable
discussed above as well as both $100,000 notes receivable were
outstanding and in technical default; however, the Company had not
demanded repayment. No allowance for the past due notes receivable
was recorded as of July 31, 2003 since the Company and Vista
continue to work together under the license agreement discussed
above and the Company is evaluating its option to convert the notes
receivable to equity in Vista.
Vista is fortunate to have such an understanding creditor.
This filing describes a company whose regular product and service offerings
continue to decline in market share and revenue. The filing mentions new
initiatives ("web services") but lacks specifics and does not go so far as
to predict any sort of revenue from those initiatives. SCO's great hope
for the future remains SCOsource. In that context, it is interesting to
note that the
company's "Linux license" is not mentioned in any significant way here.
The first public announcement of this license came after the close of the
quarter, but it was clearly in the works at that time. If SCO thought it
would get any kind of real revenue from this license, it would not have
hesitated to say so. Instead, we continue to hear about exactly two
companies - Sun and Microsoft - which are keeping SCO on life support and,
apparently, intend to continue doing so. Meanwhile, attacks through the
courts and the market are making themselves felt; SCO is finding itself
fighting an increasingly defensive battle.
Anybody who is considering investing in SCO would be well advised to read
this filing in its entirety.
Comments (17 posted)
[This article was contributed by Joe 'Zonker' Brockmeier]
The Open Source Development Labs (OSDL) have been on a bit of a
high-profile hiring spree this year. First OSDL managed to sign Linus
Torvalds to their roster, then followed quickly with kernel maintainer
Andrew Morton. Now OSDL is bringing on open source analyst Stacey Quandt
as Principal Analyst.
Quandt has worked for Giga Information Group, where she started Giga's
Open Source Research program, and for Forrester after Giga was acquired
by Forrester. As an analyst that specializes in open source, Quandt has
been widely quoted in the tech press and she has been a longtime
proponent of Linux and open source -- even on the desktop, judging by
this quote from a June story on Ximian on Newsfactor:
"The desktop is Microsoft's last stand for near dominance, which will
gradually erode with greater awareness of the maturity of Linux desktop
Unlike many analysts, Quandt has not been willing to parrot the party
line that Microsoft solutions are cheaper. After IDC released a study
last year saying that Windows 2000 was more cost-effective, Quandt
questioned the numbers cited by IDC according to this
article in PC World:
...the acquisition costs for hardware and software that IDC cites are
suspect, according to Stacey Quandt, an analyst with Giga Information
Group. She said Windows systems would seem to account for more than 10
percent of the total cost due to ongoing licensing fees.
Quandt is also one of the analysts who refused to take SCO's word that
Linux contains misappropriated intellectual property at face value.
While Laura DiDio of the
Yankee Group and several other analysts bought SCO's line, Quandt
called for SCO to show its cards, and
refused to sign SCO's NDA, calling the offer a publicity stunt.
We wanted to ask Quandt about her new role with OSDL, but she was
unavailable to answer questions for this story, as she's on the Linux
Lunacy cruise. Nelson Pratt, Director of Marketing, was available. Pratt
says that Quandt's job will be working with research firms doing work on
Our members have consistently cited the lack of extensive Linux ROI, TCO
and Migration Cost research as a problem for them. Several existing
research companies are starting to address this, and many are interested
in having OSDL participate in some way. Stacey's research background
makes her the right person to represent OSDL in its work with industry
research firms. Original research is also a possibility in the future
depending on our members' needs.
also notes that Quandt will be principal speaker for OSDL at conferences
and tradeshows. Pratt declined to comment on any other Linux luminaries
that may be joining OSDL in the near future.
Comments (2 posted)
Page editor: Jonathan Corbet
Inside this week's LWN.net Weekly Edition
- Security: A bad week; new vulnerabilities in OpenSSH, sendmail, MySQL, KDE, others...
- Kernel: Pluggable OOM killers; driver porting: char devices and large dev_t
- Distributions: Revisiting RPM Package Management; Reviews of Mandrake, SuSE, Red Hat and Libranet
- Development: The Screem HTML/XML Editor,
new versions of Firebird DB, MySQL, OpenSSH, Twisted,
GNOME, KDE, Scribus, GnuCash, Samba, Gnumeric, GNOME-Office, Galeon,
- Press: Cost of Linux vs Microsoft, SCO letter to Linux community, Havoc Pennington
interview, Is Linux Annoyng?
- Announcements: Linus responds to SCO, new GNOME user guides, ApacheCon 2003,
EGOVOS 3 in Paris.
- Letters: LWN's distribution coverage; correcting the press.