This week's SCO fun

The company announced its first-quarter results, which were just as bad as had been expected. SCO's revenues are down almost 20% from one year ago, and the reported loss is $2.3 million. The actual loss, however, was $5.2 million; some residual accounting weirdness in the BayStar deal allowed SCO to paper over the difference. SCO will not be able to use that trick in the future, however; instead, the restructuring of the BayStar deal will likely force the reporting of a significant loss in the second quarter.

The end result is that SCO is not making any money. The Unix business is dying, helped along by SCO's "sue your customers" business model. The company has only managed to sell "a handful" (Darl McBride's word) of "Linux licenses" - $20,000 worth in the first quarter. The company's stock has fallen to about half of its peak value ($22.29, last October). Things are not looking good for the SCO group. In such a situation, the quarterly conference call did not look like it would be much fun for SCO's management. So it was time to set up a diversion.

That diversion came in the form of two new lawsuits - the long-promised end-user suits, sort of. The first is against AutoZone, a former SCO customer which switched to Linux. SCO claims "AutoZone violated SCO's UNIX copyrights by running versions of the Linux operating system that contain code, structure, sequence and/or organization from SCO's proprietary UNIX System V code in violation of SCO's copyrights." The actual complaint (available as an 8-page PDF file) is surprisingly vague; the core of the suit can be found in two paragraphs:

In the IBM case, SCO has alleged that IBM helped AutoZone misuse SCO's Unix shared libraries on Linux. When dealing directly with AutoZone, however, that claim has gone away. The complaint as a whole looks like a desultory effort, not something that was months in the making.

The second suit is against DaimlerChrysler. In this case, SCO is picking on a Unix licensee which has refused to answer SCO's "compliance certification" demand from last December. This suit is not directly related to Linux, yet; SCO is just trying to force compliance with a Unix license clause (allegedly) giving SCO the right to demand this sort of certification. Darl McBride admitted in the conference call that less than half of the recipients of the demand letter have responded to it. Conceivably, SCO might actually have a case here - but it has little to do with Linux users.

SCO did announce one new SCOsource customer: EV1Servers.Net. This company (formerly RackShack) bought a license to cover its 20,000-some Linux servers. EV1Servers claims that it is just trying to protect its customers, but quite a few of those customers have been rather vocal in their discontent. Surely EV1Server.Net's appearance in this Microsoft case study last September is purely coincidental.

The Novell case is currently waiting for SCO's response to Novell's motion to dismiss the case. SCO has asked for more time (until March 5) to put together this response; Novell has indicated that it will not oppose that request - but only as long as SCO files no other motions during that time. In this way, perhaps, Novell will be able to get quick consideration of its motion without being slowed down by the usual SCO delaying tactics.

In the IBM case, the long-awaited ruling on the various motions to compel discovery has finally been issued; we have it in PDF format. Both sides are ordered to come up with a lot of stuff. SCO is told to be very specific about what lines of code it's complaining about, and also "the lines of code that SCO distributed to other parties." IBM has to come up with a lot of AIX and Dynix code, and to talk more about its Linux contributions. The ruling does not appear to be a clear victory for either side.

The Utah court also allowed SCO to amend its complaint against IBM, deleting its trade secret claims and adding copyright violation claims. IBM had not contested this change, so there was no real reason for the court to turn it down.

The Red Hat case is still waiting for the judge to rule on SCO's motion to dismiss. This ruling should be easy; SCO, remember, claimed that it was not threatening Red Hat or its customers. Red Hat had plenty of evidence to the contrary already, but the fact that AutoZone was a Red Hat customer has clarified the situation even further.

In Australia, CyberKnights has taken the next step and filed a formal complaint with the Australian Competition and Consumer Commission. The ACCC has already been sitting on one complaint; time will tell if the second complaint results in action. In Germany, SCO reached an out-of-court settlement with Univention stating that SCO will refrain from making claims against Linux without evidence. It is a minimal agreement which does little to truly shut the company up, however.

Increasingly, the SCO story looks as if it is entering the final chapters. Regardless of how many more suits the company files, it appears unable to halt the decline of its stock price and of how the company and its claims are perceived (the questions at the latest conference call were rather less friendly than in the past). SCO, by all appearances, is going down; unfortunately, the company may well be able to make quite a bit more trouble before its story ends.