SCO: Dead By December?

According to a spokesman, SCO is gearing up for a big product release: the next version of the company's OpenServer Unix platform. This raises an interesting question: Who, exactly, buys a proprietary Unix system--something that typically requires years of guaranteed support and service--from a company that may not survive another Christmas?
Sometimes a news story gives you everything you need to understand an issue. Other times, you need the right kind of context to find the heart of the matter.

One of our stories this week illustrates this point: The news that SCO, the much-beloved Unix vendor now engaged in an intellectual property death match against IBM, resubmitted the SEC documents over which Nasdaq threatened to delist the company's stock. In this case, we get the story covering what SCO does with the documents and why--but how about the story behind what's in the documents?

This has nothing to do with the quality of the coverage; TechWeb correspondent Alexander Wolfe did a fine job reporting the story. In fact, a reporter wouldn't last long if he or she adorned a news item about SCO with the sort of analysis one finds in abundance at a site such as Groklaw.

Once you've got the facts, though, I suggest heading over to Groklaw to get the rest of this story. Pamela Jones isn't a lawyer, but she beats the pants off most legal weasels with her ability to cut through pages of mumbo-jumbo to extract what matters. She does just that to SCO's belated regulatory filings, digging up more than one nugget that I'm sure SCO would rather leave buried.

There's plenty of grist here for Jones' analytical mill, but most of it raises the same question: Who in their right mind would buy enterprise software from this company?

Most business customers count on five to seven years of support when they buy mission-critical software, and many expect to support something like an enterprise Unix system for even longer periods. Yet based on the information Jones points out in these documents, SCO's ability to operate past 2006 almost certainly requires a swift and decisive victory against IBM--an event few people can imagine, unless they're under the hallucinogenic influence of a regular SCO paycheck.

I also recommend a message in the Groklaw forum from a reader who decided it might be fun to do a cash flow analysis on SCO. The company's regulatory filings appear to contain enough financial data to pull this off; the problem is finding it all, since this isn't the sort of after-school project SCO wants to encourage with careful organization.

As it happens, there's a good reason for the company to act shy about its cash flow: If this accounting enthusiast's numbers hold up, SCO lacks the cash even to make its last pre-arranged law firm payment in early December, much less to keep operating anything that resembles a business.

This puts SCO's claims about its "cash flow positive" Unix business into an interesting light. Why use this term, as opposed to something more succinct, such as "profitable?" Because SCO's Unix business cash flow is only positive when it excludes overhead costs. Include them, and SCO turns out to be stuck in a financial hole that no amount of cost-cutting will ever fill.

If this analysis is correct, SCO is losing enough money on its "cash flow positive" Unix business to make it tough to survive this year, much less to endure a trial against IBM that won't even start until November at the earliest.

So the heart of this topic, as it turns out, pumps pure bile: SCO can't even argue that it's protecting its long-term business interests, since it has very little chance of surviving to see a long-term anything.

What's left? For lack of a better term, SCO's tactics now represent little besides pointless, utterly vindictive economic vandalism. That's quite a legacy SCO's management is destined to leave behind, isn't it?

Matt McKenzie is editor of Linux Pipeline. A permanent link to this article is available here.

Editor's Choice
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Terry White, Associate Chief Analyst, Omdia
John Abel, Technical Director, Google Cloud
Richard Pallardy, Freelance Writer
Cynthia Harvey, Freelance Journalist, InformationWeek
Pam Baker, Contributing Writer