SCO update

The company has filed a new Form S-3 as part of the BayStar deal. That deal allows for a conversion of BayStar's preferred stock to the regular variety, so SCO had to go through the motions to register another 3.85 million shares for sale. As usual, these filings give a rare window into what is happening inside a company.

In this filing, SCO revealed (though not in so many words) that its fourth quarter results are going to be horrible. The company did (as was disclosed previously) get another $8 million from Microsoft for a "broader" Unix license. But the company will have to record a charge of $8.7 million related to the BayStar deal. The company also will take a $9 million hit to account for the $1 million in cash and 400,000 shares of stock that it has given to its lawyers. As a result, the company's income will be $17 million lower than it would otherwise have been. It does not look like a profitable quarter for The SCO Group.

SCO's law firm (Boies, Schiller & Flexner LLP) will be taking on the company's defense in the Red Hat case, and in IBM's countersuit as well. There was a great effort to put a positive spin on things at SCO's November 18 conference call (transcript available here); it is claimed that SCO will be setting Boies et al. on Linux end users within "the next 90 days." These, it is claimed, will be direct copyright suits, based on a whole new pile of "directly copied" code that has been found lurking somewhere in the Linux kernel. Of course, they can't tell us where that code would be.

The conference call hinted that, if SCO does really decide that it needs more legal battles, it is likely to go after HP customers. There was much satisfied talk of HP's indemnification offer, and speculation as to whether HP would pay license claims directly or choose, instead, to defend a lawsuit. As had been predicted months ago, HP's indemnification offer may well have just served to turn that company - and its customers - into low-hanging fruit for an SCO legal offensive.

SCO has finally spoken out on Novell's acquisition of SUSE. That deal, says SCO, would violate Novell's non-compete agreement with SCO. If the acquisition goes forward, SCO claims it plans to take action against Novell. Happily for us, the agreement in question is available on the net; the relevant text (section 1.6) reads:

If you buy SCO's argument that Linux is Unix with the serial numbers filed off, then SCO might actually have a leg to stand on here. If, instead, you believe that Linux is Linux and SCO has no right to steal it, SCO's non-compete argument makes no sense. The non-compete agreement only applies to what Novell does with Unix.

In the Red Hat case, SCO continues to try to get the suit thrown out, or, at least, to delay things. Given the "90 days" discussion in the teleconference, SCO's position that it has not threatened to sue anybody appears to be even shakier than before. This case is now waiting for a ruling from the judge on the various motions.

In the IBM case, the November 21 conference before the judge looms. If it still appears that SCO is failing to respond to IBM's discovery requests, oral arguments will happen on December 5. Sometime thereafter, SCO could find itself compelled by the judge to put forward its evidence or shut up. SCO may try to draw its own motion to compel discovery into the discussion as well.

SCO's supplemental responses to IBM's requests included some amusement in the form of a list of files that, according to SCO, contain its property. The file list looks like:

	arch.i386.kernel.i8259.c
	arch.i386.kernel.timers.timer_tsc.c
	arch.i386.mach-default.topology.c
	arch.i386.mach-pc9800.topology.c
	arch.i386.mm.discontig.c

And so on. Many people wondered why the files were listed in this sort of "flattened" form until it was pointed out that SCO's Unix offerings lack a version of "grep" which can do recursive searches. They had to have some poor intern rename all of the files into a single directory so that they could search through them.

Their searches were simplistic, to say the least. One of the files listed was (in standard Linux naming format) include/asm-m68k/spinlock.h, the entire contents of which are:

    #ifndef __M68K_SPINLOCK_H
    #define __M68K_SPINLOCK_H

    #error "m68k doesn't do SMP yet"

    #endif

One does, indeed, wonder how Linux was able to compete before IBM stole all that nice SCO technology. Seriously, though, it appears that SCO did a simple grep for "SMP" and listed every file that popped up with no regard to what was contained therein. Thus we see the quality of SCO's evidence.

Recent rhetoric from SCO has brought with it an interesting change: the company is now, repeatedly, talking about the old USL v. BSDI settlement. For those who have not yet seen it, taking some time to read the ruling which led to that settlement may be worthwhile. The introduction in the "statement of facts" is eerily familiar:

"Allegedly proprietary" is the judge's wording. This judge concluded that USL had failed to show that any copyrights or trade secrets in Unix could be enforced. The subsequent settlement freed the BSD code base for distribution. SCO is the successor to USL; why it wants to reopen this case at this time is currently a mystery. There have been occasional hints from SCO that it plans to go after BSD in the future; perhaps they are trying to tell us that this attack is getting closer. One publication quoted Darl McBride as saying that suits against BSD could happen in the first half of next year.

Where things will go from here is anybody's guess. The motions to compel in Utah and Red Hat's suit in Delaware could bring things to a head relatively quickly. Counting on the U.S. justice system to bring this situation to a quick conclusion is risky, however. We may be fighting this battle for some time yet.