The SCO Ship Is Listing

Michael J. Jordan, Linux Online Staff

December 12, 2003

I'm sure that back in late winter, Darl McBride felt confident that SCO would be quickly bought out or some sort of settlement would be reached with IBM. Back then, their catch phrase was 'Damn the torpedoes, full speed ahead.' Now, after a very large torpedo was fired by a Utah Court, we're seeing rats abandoning a ship that is surely destined to sink. What a difference two winters make. This one is shaping up to be the winter of SCO's discontent.

Monday, The Royal Bank of Canada, to avoid getting royally chiseled, (for lack of a more descriptive word) revised the terms of its capital-injecting contract, as did BayStar Capital, another of SCO's fair-weather friends. They can now veto that lovely 20 percent that David Boies, et al get if SCO were to win or be bought out. A Royal Bank spokesman was coy, only commenting that their investment in SCO was "made to hedge an economic exposure resulting from client transactions." While I'm still waiting for the plain-English translation from a Wall St. friend of mine, I think you'll notice the key word 'hedge' in the statement. That is, hedge as in 'hedge fund'. SCO, as a lot of us have pointed out, is the object of a large bet with gamblers with very deep pockets. Speaking of gambling, TheStreet.com has gone so far to call the SCO's IBM suit "a lottery ticket" and point out how investors were "rethinking the worth of those tickets."

And since I started with a nautical motif, it would seem that the proverbial wind is going out of SCO's sails due in part to the excessive windiness of Darl McBride's treatise on the Founding Fathers. Interpreting the US Constitution is a bit like movie stunts - something you shouldn't try at home. That didn't stop Darl from trying it and the resulting explosions were predictable. Even Linus Torvalds, who is not even a citizen of the US, does a better job at it. He pointed out the obvious fact that US law can't make you do something for profit. To paraphrase Calvin Coolidge: the business of America may be business, but if your business isn't business, then what business is it of Darl's to tell that it has to be.

Wall Street's wait-and-see attitude is now wait-and-see-it-sink thanks to the combination of SCO's legal setback, investor cold feet and total lack of seriousness on the part of SCO management. Motley Fool sums up the new attitude toward SCO by calling them "the mouse that roared". Those of us who have watched enough Bugs Bunny cartoons know that a mouse may be able to scare an elephant, but it's only a matter of time before the elephant picks up Sylvester the cat and uses him to beat the mouse to death.

SCO now has 30 days to lay their cards on the table - 30 days which include the Christmas holidays. They have also delayed their 4th quarter earnings report until December 22. This shows that they need a little more time to put on a brave face to report on a situation which is becoming increasingly unfavorable for them. The truth is that the SCO ship has been taking on water for quite some time, but their ability to bail out via PR has been good in an almost mind boggling way. They've been able to keep their stock high by spinning very effectively. But the latest spin isn't working.

On being given 30 days to produce the alleged code misappropriation, Spokesman Blake Stowell's commented that is was:

"absolutely not a surprise to us at all. We were sure at some point we would need to be more specific, and this was that point."

To be effective, spin must have at least some touch, however tenuous, with reality. But this statement is, to quote Linus Torvalds, "blathering". There is no trace of the real in it. Now with the latest supposed denial of service attack against their servers, they're not even spinning anymore. They've gone straight to whining.

The reality is that the water the SCO ship is taking on is now beyond their ability to bail it out. Even the normally bullish Laura DiDio can see it. "It is reality time. And right now, the reality is biting SCO." And if Ms. DiDio is finally getting it, then it's women and children first. We'll see on December 22 who starts lining up for the life boats.

Michael J. Jordan can be reached at Michael.Jordan++AT++linux.org