SCO Sues To Become Relevant

Guest Analysis written by Pete Mawse on Thursday, May 22, 2003

from the sco-is-filled-with-scofflaws dept.

The announcement by SCO last week that it intends to sue everyone who has ever uttered the word "Linux" is the latest in a series of desperate measures by SCO to be noticed.

In the early 80's, SCO noticed how Microsoft took an obscure operating system called "Quick and Dirty" DOS, and resold it as the highly successful MS-DOS. SCO decided to try the same strategy: they got an obscure OS from Microsoft (Xenix), and resold it as SCO Xenix. They managed to sell a dozen copies. Scratching their heads, they noticed that Microsoft had changed the name of QDOS before it became successful. It was obvious they needed to do the same, and SCO Unix was born. The strategy worked. The company sold 125 copies in the first year alone, a 10x improvement over the sales of SCO Xenix!

But things were not going so well. They were still being outsold by Solaris, AIX, Digital Unix, Ultrix, HP/UX, and even Lu/nix on the Commodore 64. Meanwhile, customers were not happy with SCO Unix because it wasn't enough like real Unix. If Unix were a car, they said, SCO Unix was like a driving motorized wheelbarrow through a mosquito-infested swamp naked with both hands tied behind your back.

After a marathon 2-week strategy session, SCO decided to address those customer concerns by buying the Unix name. SCO acquired Unix Systems Laboratories, then owned by Novell, and declared that SCO Unix is now real Unix, so there, Nyeh nyeh! SCO also acquired Unixware from Novell, which it tried to sell alongside SCO Unix. The seven customers who bought Unixware returned it for reasons ranging from "It was the wrong size" to "That color is sooo last year".

In the meantime, Ray Noorda and Ransom Love founded a Linux company, Caldera. They decided to target "Linux for Business". Business responded with a resounding "What the hell is Linux, and why would I want to buy it from a two-bit fly-by-night company that sells it in retina-singeing green boxes?"

Over the next few years SCO would put out a number of press releases blatantly ignored by the public. Their customer base slowly trickled away. Caldera, on the other hand, went ahead full-steam with their "Linux for Business" campaign. "Linux for Business" ensured that they would have low mindshare not only amongst geeks, but also amongst businesses, who would say, "You want me to buy an operating system that doesn't give me anyone to sue when it fails? Pfft, I'd sooner buy from SCO."

None of this, however, deterred Caldera from developing their flagship product, Caldera OpenLinux. (In those days, the use of the word "Open" preceding a product name ensured a 25% increase in sales. This meant that Caldera sold 3.75 copies of OpenLinux in 1997, instead of the 3 they otherwise would have sold. SCO also used this trick to inflate their sales: They had renamed SCO Unix to SCO OpenServer several years back, netting them 14 additional sales).

Then a turning point came in 1998, when a noted investment bank said to a group of Wall Street insiders, "Sorry, we've just run out of dot-com IPOs, but how about some Linux IPOs? They're just as good...". The Wall Street insiders ate it up, and Linux became the hottest buzzword since "New Economy". It didn't even need to begin with a lowercase "e" or end in ".com".

Customers started asking for Linux. SCO became extremely agitated. "Geez, what is wrong with you people?" ranted the company CEO. "First you wanted us to be more Unix-like, so we gave you Unix, the real thing, now you tell us you don't want that, you want Linux, something which only pretends to be like Unix, and contains no Unix whatsoever. DID YOU HEAR ME? IT HAS NO UNIX WHATSOEVER. It's a fake! An inferior product. If you want to use it, I can only conclude that you are a deranged imbecile who must be trying to compensate for being less then well-endowed both intellectually and in other areas. Oh, and by the way, I'm pleased to announced "LXrun", a tool that allows you to run Linux applications on your "SCO® OpenServer(TM) server".

In spite of this, SCO customers began dropping like flies.

The Caldera OpenLinux development team introduced its crowning achievement, the first GUI Linux install from a major (?!?) Linux distributor. Named "Lizard", this new install was so easy to use that it actually let you play Tetris while it was installing. This actually backfired when a large portion of the sysadmins at the five companies who purchased OpenLinux 2.3 were canned for allegedly playing games on the job.

Caldera had another problem. While it had preached "Linux for Business" for years, and while businesses were now actually buying Linux, they weren't buying from Caldera. That company with the stupid red hat was eating their lunch.

Caldera needed to do something to win mindshare. What if they took on Microsoft? Then maybe they could win the hearts and minds of hard-core geeks. But what could they sue them for? Then they decided to buy a product that came with litigation against Microsoft already included -- DR-DOS. "DR-DOS?" asked skeptical company insiders. "DR-DOS!" exclaimed the believers. "We can always use it in a kiosk, or set-top box or something." So Caldera went ahead an sued Microsoft on grounds that Windows 3.1 deliberately made DR-DOS unstable, in spite of the fact that nobody uses Windows 3.1 anymore, and even fewer used DOS of any kind. Microsoft lawyers tried to keep a straight face as they quietly settled out of court for a reported $150 million in cash and scratch tickets.

Then, in a stroke of great timing, Caldera went public the week after the Nasdaq bubble started to burst. In spite of this, they managed to double their share price (although they didn't get the 700% launch that previous Linux IPOs enjoyed). So with a pile of cash, and a way-overvalued stock, Caldera decided to look for a decent company with synergy to acquire. They found SCO instead, as the good ones were already taken. SCO sold operating systems for the PC and had almost no marketshare and had bought a dead-end product from Novell (Unixware). Meanwhile, Caldera sold operating systems for the PC and had almost no marketshare and bought a dead-end product from Novell (DR-DOS). So at least there was synergy.

In an attempt to further alienate their customer base, Caldera announced that future releases of OpenLinux would actually contain the SCO kernel, because Unix-like kernels are a basic commodity. "This would be like Butterball buying Hormel, and announcing that Spam would now be the official main entree of Thanksgiving dinner," said Dr. Jacob Jacobson, professor of Information Technology Analogies at MIT.

When Caldera discovered that its OpenServer line outsold its Linux line 3-2 (no, that's not a ratio, those are actual sales figures), they changed their name back to SCO.

This brings us to the current situation. After the company's unsuccessful "We're a player, dammit!" campaign caused 10% of their customer base to flee, SCO decided to resort to that time-honored American business tradition, litigation. After all, they had already taken on Microsoft, so they figured they could take on IBM. They sent IBM a letter oozing with legalese that said, "All your AIX are belong to us." After IBM blatantly ignored them, they've decided to take on the entity that actually cost them all of their lost revenue: the customers who failed to buy or even notice SCO/Caldera products, but instead bought a competing Linux product.

I had a chance to sit down with a member of SCO's legal team, Mr. Swin D. Lerr, Esq. Here's a portion of our conversation:

Me: "But didn't your CEO once state that Linux has no Unix code in it?"

Lawyer: "Well, let me ask you this, your bank probably claims to be hassle free, right, but is it? The same goes for Linux and Unix."

Me: "Huh?"

Lawyer: "Let me spell it out for you, we know Linux has Unix code in it, we put it there. After all, what else could integrating the best features of Unix and Linux possibly mean?"

Me: "Well then, how can you possibly sue for that?"

Lawyer: "How the code got there is irrelevant. The only thing that matters is that the code is there now.

Me: "What about the allegations that Microsoft put you up to this?"

Lawyer: "There is absolustely no truth to those rumors."

Me: "It seems awfully suspicious that they are the first to pay up... no questions asked."

Lawyer: "They're scared of us, after all we beat them once before."

Me: "From what I hear, the general consensus is that SCO is cash-strapped and desperate and that's why they are doing this."

Shyster: "Nonsense, SCO and Caldera have run for years without cash, why should now be any different?"

So there you have it, SCO is not doing this for Microsoft, they are not doing this for the money, they just want some customers. If their sales force can't win any, then maybe their lawyers can.

Pete Mawse is an analyst with the Blartner Group.

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