SCO and Public Perception

--Dow Jones

The word from CA would appear to be clear: the company did not go out looking for "Linux licenses" from the SCO Group. Instead, the Canopy Group, SCO's largest stockholder, decided to toss the licenses in as part of an apparently unrelated settlement some months ago. It must have seemed like a good idea at the time; it was an easy way to claim that a large company had obtained licenses from SCO.

Given the subsequent revelations, one would expect the press to be looking into false statements of "Linux license" sales. There is also the interesting question of just why the Canopy Group felt the need to push Linux licenses in this way. Canopy claims to not be a part of SCO's crusade, but events like this suggest otherwise. Instead, however, we got headlines like:

• CA signed Linux license from SCO Group (Forbes)
• CA named as SCO licensee (InfoWorld)
• Computer Associates Signs Licenses from SCO to Use Linux (Dow Jones)
• CA-SCO deal a blow to Linux (ITWeb)
• Computer Associates pays off SCO (Slashdot)

For quite some time now, the SCO Group has been very well treated by the media. Many of its claims have gone unchallenged, and even the company's goofiest statements get wide coverage. Thus we hear that Darl McBride's enemies are out to kill him, but important little details, like the fact that SCO dropped the trade secret claims that were at the core of its initial suit against IBM, somehow don't get covered. One can only guess that SCO v. IBM as a "David v. Goliath" story makes for better headlines.

Even so, the world beyond the free software community is clearly beginning to figure things out. Consider the latest from the Motley Fool:

The questions asked by reporters at the March 3 conference call are also telling: they aren't buying it anymore. To really see how the SCO PR battle is going, however, one should take a look at the company's stock price.

Anybody who was paying attention during the dotcom bubble knows better than to attribute too much rationality to stock prices. That notwithstanding, a stock market is an efficient machine for integrating the opinions of a large number of unrelated people. SCO's stock price peaked briefly at $22.29 in October, when the BayStar deal was announced. At that time, the company's market capitalization was a little over $300 million. Given that SCO has no business left other than its Linux-related litigation, its stock can be seen as a sort of call option on SCO's lawsuits. Even at its peak, SCO's stock price represented a perceived chance of collection of less than 10%. If the company were truly set to collect billions, it would not be valued in the millions.

As this article was being written, SCO's stock has fallen below $10/share for the first time since July. The value of the call option is clearly declining.

Since stock prices are interesting as an indicator of public perception, we have prepared an annotated chart correlating the company's stock price against various events from the last year. It shows how the public view of SCO has gone up and down and the correlation with the actions of SCO and others. SCO may yet manage to engineer another increase in its stock price, but it seems unlikely to get anywhere near the highs of last October. If SCO's actions are truly part of a stock scam, it would appear to have failed.

Most readers will be familiar with the Halloween X memo leaked to Eric Raymond. The memo is for real, but SCO claims that its author, outside consultant Mike Anderer, misunderstood the situation. It has, regardless, caused the wider world to look again at Microsoft's relationship to SCO, and may have played a part in the recent stock decline.

Meanwhile, SCO has filed its memo in opposition of Novell's motion to dismiss the "slander of title" suit. SCO maintains that the asset purchase agreement was sufficient to transfer the Unix copyrights, and that it has, indeed, suffered damages from Novell's actions. SCO is also trying to get the case moved back to Utah state court after Novell moved it to the Federal court. The Federal court is the same one which is hearing the IBM case; perhaps SCO has decided it no longer wishes to try its luck there.