SCO: Should I buy? Should I sell? Should we call the SEC?

A clueless investor's guide to SCO

Michael J. Jordan, Linux Online Staff

October 17, 2003

Disclaimer: The following does not represent forward statements - just backward ones. The author owns no stock in any company for the same reason he doesn't own a gun. He'd probably end up shooting himself in the foot with it.

It would seem that you don't even have to win a lawsuit or even reach a settlement to make wads of cash from a case. Just ask the guys at SCO.

A few days ago, Deutsche Bank analyst Brian Skiba's advice was to buy SCO stock. Though he cautioned investors on the volatility of this stock vis-a-vis the lawsuits with IBM, RedHat and potentially the rest of the free world, he opined that SCO stock could reach $45.00 US. 45 bucks! Unbelievable. Where do I get some of this stock?

Wait! Before you leap, let's put this in some perspective.

This is a company whose stock was trading at 78 cents just one year ago. It was company whose time had come ... and gone; owners of a bunch of legacy Unix code with a dwindling user base and some long range plans to knock RedHat off the top spot with three partners (one of which, TurboLinux, is reportedly a post office box). Despite the best of intentions, Ransom Love couldn't make a dime off of what they had to offer and he was given an office further out in the Utah desert. Enter Darl "Mr. Soundbite" McBride. I am convinced that when our friend Darl took over, he suspected that all that paper in the filing cabinet (the yellowy ones with the big AT&T logo on them) might mean something and immediately got on the phone with his godfather Frank Yarro the head of Canopy Group. Canopy is venture capital firm that doubles as SCO's ATM and a place where tech innovation is designed on yellow legal pads. Yarro once said: "I'm in the business of growing tech companies, and if I need to litigate to protect them, I'll do that.", which means: If I need to drag everybody and his uncle into court to keep one of my dying businesses afloat, I'll do that.. Actually, he didn't just drag anybody into court. Yarro picked a fight with IBM. If you're thinking why I didn't say McBride picked the fight, it was because he probably didn't. When Yarro saw what was in that filing cabinet, dollar bills began floating in the air, just like the guy with the singing frog in the Bugs Bunny cartoon. Not that I don't think Darl is smart enough to have seen those animated dollar bills, I just assume it was Yarro. I mean, it was Yarro to whom IBM recently sent a "supeenee" as Wilford Brimley pronounced it in Absence of Malace. Those IBM lawyers are pretty smart guys. On the other hand, those SCO/Canopy guys have been not so smart as they have been lucky. Again, let's put this in perspective.

SCO sues IBM and:

• Microsoft appears out of nowhere and says something vague about intellectual property and hands millions over to SCO for "licenses".
• Sun comes out (pardon the pun) and says they're cool with SCO. No worries there. They have the "licensing" issues clear.
• SCO says they'll sell you a Linux "license" and announces that somebody actually bought one. They won't say who.
• SCO pulls IBM's AIX "license" and later pulls some other "license" for a Unix variant they bought and didn't even use. An IBM spokesperson announces that what SCO actually pulled is the public's collective leg.
• SCO announces their 2nd quarter earnings. During the conference call, someone asks McBride where the money is coming from. He responds: "Licensing".

My recommendation would have been: SELL. But... their stock went up.

Come August though, and the counter punches started coming their way.

• RedHat files suit on August 4th
• IBM files a counter suit a few days later
• The company's annual meet-n-greet known as SCO Forum serves up the most embarrassing development yet. The stolen code actually went missing in the 1970s when Linus Torvalds was a toddler. Linus wastes no time in defending himself. "If they think I stole it", he says "They are smoking crack!"
• While there is still a little residual summer sun, a German court fines SCO.
• SCO's Australian headquarters gets their story mixed up. They're not planning on suing anybody, at least not Down Under. Memos cross the globe, stories get straightened. Will SCO sue? Yes. No. In the word's of Sam Goldwyn: 'I'll give you a definite maybe'.
• McBride, anxious to return the "Public Linux Enemy Number 1" crown back to Bill Gates, sends his version of an olive branch in form of a prickly pear. In it, he tells the Linux community that he's right. We should admit it and live with it. We should disown our hippy ways and embrace capitalism by turning over all our rights to him.
• Some average shlubs actually try to buy licenses, but SCO won't sell them one. "What's going on here?" asks Joe Shlub.

And after all this bad news, what was my recommendation? SELL SELL SELL! And SCO's stock went up. Hovering around the 20 dollar mark on the last official days of summer. I'm totally clueless, as you can see.

So what have we seen in the past month or so? Well, Hewlett-Packard has said that they are going to offer that indemnity thing that SCO, Steve Ballmer and Laura DiDio have been ranting about. Of course, when SCO said 'I told you so' 5 minutes after the announcement, HP clarified by saying that they had actually never heard of SCO, but you never can tell who's going sue you. IBM added another suit around the end of September to make it a pair of suits. That deflated the SCO stock balloon somewhat, but nothing that would make a shareholder need to take a stiff drink.

Now SCO says they're not going to be invoicing people. And why not? I guess they don't need the money anymore. It would appear that Santa Claus came early this year disguised BayStar Capital. They left a nice 50 million dollar check under the potted plant in Darl's office. Now there's talk about who's behind BayStar, why Deutsche Bank likes SCO and how long 50 million will last when you're paying lawyers.

And now someone is claiming that Microsoft is behind BayStar!

As for investing in SCO, I am totally stuck now. - Should I buy? Should I sell? Or should we call the SEC?

Michael J. Jordan is the webmaster of Linux Online. Please send stock tips to Michael.Jordan++AT++linux.org (don't forget to replace ++AT++ with @ - to help discourage spammers)