Notes from the SCO conference call

That kinda reminds me of domestic violence in a weird way... a psychotically jealous person who gets mad if 'his' SO even so much as talks to someone else. And of course the lesson to be learned is... don't get attached to abusers and thugs. But some people are attracted to mindless bluster and cockiness, as we all well know, so the tragedies go on... in both arenas.

Migrate away from Linux? To what, dare I ask? Surely not Unixware???!!!!

But I'm beginning to think that it simply can't be ignored, in the hope that smart lawyers working for smart corporations will send the bad guys packing. Maybe it is finally time to write SCO out of open-source completely. Remember the readme file that GNU posted with gcc not so very long ago? Maybe it is time to #undef them, and reveal this company for what it really is - an IP company, and _not_ a software company. If this is what they want to be, then fine. Let them be that while the lawyers duke it out.

SCO's stock price is tied to how much profit they make every quarter, and how much cash they have or expect to have. That said...

1. Most businesses, when sued for IP violations (or IBM's contract dispute) tend to find it in their own best interest to make such lawsuits go away. Doing so tends to relieve speculation on their own business model and stock price, and allows them to 'move forward'. Most 'sane businesses', as a rule, tend not to purposely involve themselves in a lengthy lawsuit, even if they're right. Of course, if SCO gets any fraction of the money they want in damages from a settlement, they really are worth the stock prices that Deutche Bank claims.
2. Conventional business wisdom says that when a company has something that everyone else needs - but can and does charge exhorbitantly for it - it becomes a buyout candidate to make the pattern stop. Deutche figures on this being a possibility as well, because they believe it may be ruled that SCO really does own UNIX and all possible derivatives. Not only would SCO then be a buyout candidate, but a very expensive buyout candidate.
3. Lastly, if either of the above two don't happen, there's still (in a typical SCO investor's mind) a 50-50 or better shot that this court case will be found in SCO's favor - and that, if they got the damages they seek from IBM, would probably make $45 a share cheap. I object in principle to Deutche Bank's assertion that SCO is a 'buy'. They've explained both that the stock is extremely speculative and has the possibility of reaping great rewards or becoming worthless depending solely on the IBM lawsuit. Needing to say this, as I see it, should necessitate a 'hold' rating by definition: caveat emptor. Encouraging investors to accumulate shares of SCO because it may or may not go way up, but has a real possibility of nosediving to $0 doesn't make sense.

   Of course, in the end, there's one more factor...

4. Investors pay attention to the news they hear, and they're fickle. They've heard that SCO has gotten massive venture capital, support from Microsoft and HP (through its indemnity), and two investment banks consider them 'buys', which itself is enough for many investors. On its face, that looks like a very promising company. Particularly because SCO has so few shares outstanding, it's very easy for the share price to move up and down. As investors continue to hear good news, the price will go up and up and up. If they actually DO hear news that suggests SCO is in big trouble (say, the judge in the Redhat case granting Redhat its injunction), there will be a panic on the stock. The big problem Redhat and other GPL advocates face right now is that they do not have a mouthpiece capable of or willing to refute SCO's press releases as they come out - hence, why SCO is able to sell its bright future.

If an injunction decision on SCO v. Redhat had been made by now, this stock race might have turned out quite differently. I expect SCO will delay the ruling on that injunction as long as they possibly can for that reason.

With all that said, the next quarter's earnings and conference call will probably come before the Redhat v. SCO injunction hearing and decision. Assuming nothing else is found to specifically counter what SCO is doing, head-on, the pessimistic side of me expects to see from them:

• Continued muttering about possibly invoicing customers, while never doing so, keeping the threat of invoices in the spotlight. While Linux advocates are beginning to suspect the invoices will never come, SCO hopes this will erode wider corporate support for Linux.
• An eventual pulling of SGI's UNIX license, despite the current delay - not doing so won't help their stock price and overall 'case'. I expect within a month's time that SCO will find a 'gross violation' pretext to do so, sight unseen; they will, in fact, probably claim that pulling the UNIX license is completely justified, since with SGI admitting some code was copied, surely there was more that SGI just refuses to admit. I believe the current delay is steered by trying to give an impression to the market that SCO is being 'fair' and giving companies room to try to meet them where they are, but I don't expect the reprive to last.
• Continued delay of offering a Linux binary license one can pay for with cash - doing so keeps the licenses in the news even while they're not actually offered to anyone. October 31 will not be the last absolute-for-real-we-swear-no-more-extensions-it's-double-now deadline. Every time a deadline passes, tech reporters wait with baited breath for the extension so they can report on it again.
• An extremely rosy Q4 which shows a continued dumping of money into SCO with no tangible market gains in any specific area
• A $60+ price of SCOX by year's end. I'd like to think that's ridiculously high, but I'm taking into account, again, investors believing what they hear, and low liquidity of the stock.

I don't like SCO, and I don't believe what they are trying to do to Linux is right, lawfully or principally. Given the chance, I think any IP claims SCO has can be rectified in hours by code removal, and some short but measurable time after by recoding in a cleanroom.

But my thoughts on principles aren't particularly relevant; on its face, it's fairly obvious from its price jump from $.50 to $20 that they've come up with a brilliant short term business plan that investors, investment banks, and Microsoft (as a rival) believe is worth throwing money at. Whether the business plan actually pans out (based on a single or multiple lawsuits alone) won't matter to those who cash out before that. We have already seen SCO executives, Canopy group stock moves, and Vultus do this, and they are surely not unhappy with the raw profits they've already made.

Someone on the GPL side needs their day in court to stop the train SCO is running. For all the muttering, pandering, and threatning they're doing, I think SCO will do everything it can to make that day take as long as possible. I fully expect they'll ask for yet another extension to the deadline on Redhat v. SCO's hearing; failing that, file a lawsuit of their own against Redhat to delay in that way.