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Microsoft And SCO Group: What's So Secret?

Microsoft last year signed two deals, worth $16 million, for SCO technology and rights, but it's still vague on how it will use them. Microsoft had best come clean if it wants to put to rest rumors that it's secretly behind the SCO lawsuit.

Some people suspect Microsoft is conspiring with SCO Group, the litigious, self-appointed flag bearer of intellectual-property rights for the commercial software industry, by covertly sending other companies SCO's way to sign license agreements worth tens of millions of dollars. The money brought in through this covert arrangement, the thinking goes, is keeping SCO afloat long enough to continue its legal campaign on a widening front that now includes lawsuits against IBM, Novell, AutoZone, and DaimlerChrysler.

The conspiracy theory gained what seemed like a shred of evidence when Eric Raymond, the outspoken open-source advocate who sometimes uses satire to make his points, got his hands on a leaked E-mail message that, interpreted a certain way, implicates Microsoft in a money-making scheme for SCO. It seems to imply--and I say "seems" because the E-mail message in question is anything but clear and comprehensive--that Microsoft had a role last October in engineering a $50 million investment in SCO that was led by BayStar Capital. SCO, in fact, acknowledged the authenticity of the message, but it described the contents as "a misunderstanding" by its author, an outside consultant. Microsoft, meanwhile, put out a statement describing Raymond's analysis as "inaccurate" and denying any ties to BayStar.

But Microsoft is attempting to put out this fire--or mostly smoke so far--with a squirt gun. What's really needed is a clear, unequivocal explanation of the nature of the company's relationship with SCO. As you may recall, SCO revealed last May that Microsoft had signed a contract to license some of its Unix code for an undisclosed amount. A few months later, Microsoft signed an extension to that original agreement that included additional technology and usage rights. The second deal was not disclosed by either company. Together, the deals were worth about $16.6 million, a significant 21% of SCO's total revenue in fiscal 2003.

The mystery behind Microsoft's arrangement with SCO could be cleared up, and maybe some of the speculation put to rest, if Microsoft would disclose more details about how it plans to use SCO's technology. But it won't. I've asked for that information four times in the past 12 months, but Microsoft will only discuss its plans in the broadest terms, and even then unconvincingly. Microsoft has indicated that it intends to use SCO's Unix code in Microsoft's Services For Unix product, a subsystem of Unix APIs and protocols that helps customers move Unix or Linux applications over to Windows or lets those mixed environments co-exist through interoperable files and directories.

But I was surprised to learn that Services For Unix version 3.5, when it was released in January, didn't include any of the new SCO code available to Microsoft through the licensing agreement. SCO's technology "wasn't a factor in this release," Dennis Oldroyd, a director with Microsoft's Windows server group told me in a January briefing on SFU 3.5. Oldroyd explained that Microsoft was "pretty far in the development cycle" for SFU 3.5 when the SCO license was signed.

And Microsoft isn't any more forthcoming about how it might use SCO technology in future releases of Services For Unix. "We are in the process of looking at features and functionality for the next release," Oldroyd said in January. "But we don't have any plans we can talk about right now."

The reticence is hard to understand. Microsoft frequently talks about future products months, even years, in advance of delivering them. Last October, at its Professional Developers Conference, Microsoft discussed Longhorn, its next major operating-system release, at length. Microsoft's customers might also be interested to know what comes next in the company's strategy to interoperate with Unix and Linux.

Last week, when I asked Microsoft for the fourth time about its plans to use the code that's at the center of the technology industry's biggest legal storm, here's Microsoft's E-mail response in its entirety: "The terms of Microsoft's agreement with SCO are confidential. As such we can't disclose full details or financial terms. That said, the license with SCO was extended under the option in the original agreement, to grant rights to additional technology related to Unix interoperability and broaden MS rights around already licensed technology. The end result is more flexibility in potential product design, development and deployment."

In a column on this subject nearly nine months ago, I pointed out that Microsoft may have signed a SCO license to protect itself from the kind of legal action SCO has taken against other companies. At the time, Microsoft general counsel Brad Smith had issued a short statement saying the deal with SCO "helps to ensure IP compliance across Microsoft solutions and supports our efforts around existing products like Services For Unix that further Unix interoperability." Last week, a Microsoft spokesman said the two deals with SCO are meant to ensure not only interoperability but also "legal indemnification for our customers."

Microsoft may have perfectly legitimate business reasons for signing with SCO, and it may have absolutely nothing to do with the shenanigans some have suggested, but there are too many unanswered questions to know. What code and rights has Microsoft licensed from SCO? Where and when will SCO's code be used in future Microsoft products? Why was a license extension needed, among other things, to broaden Microsoft's rights around already licensed technology?

Microsoft should do a better job of answering these questions. Until it does, people are left to connect the dots on their own. And some are drawing an ugly picture.

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