SCO Denies Report Microsoft Lined Up $82+ Million Funding For Lawsuit

The SCO Group is officially denying a published report that claims Microsoft funneled more than $82 million and possibly up to $106 million into the embattled Unix company to help it fight IBM and Linux.

The report, dubbed Halloween X: Follow The Money and published Wednesday by Open Source Initiative President Eric Raymond, is based on a leaked internal SCO e-mail thread between SCO's senior vice president and general manager of SCO's SCOsource Division, Chris Sontag, and Mike Anderer, CEO of a Salt Lake City-based strategic consulting firm called S2.

In the e-mail exchange dated Sunday, Oct. 12, 2003--just days before BayStar Capital's $50 million investment in The SCO Group--Anderer offhandedly claims in that e-mail that Microsoft has given SCO more than $82 million through various investment vehicles and is willing to put up more.

SCO signed a contract with S2 in July of 2003.

On Thursday, a SCO spokesman confirmed the authenticity of the e-mail thread but he claimed Anderer was misinformed and was told so at the time of the e-mail exchange. The spokesman also claimed that Eric Raymond's interpretations of that e-mail--superimposed on the e-mail thread and posted on his web site--was a misinterpretation.

"We believe the e-mail was simple misunderstanding of the facts by an outside consultant working on a specified but unrelated project to the BayStar transaction, and he was told at that time of his misunderstanding of the facts," SCO spokesman Marc Modersitzki told CRN during a phone call on Thursday. "Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or take part in the BayStar transaction."

S2's telephone in Salt Lake City did not pick up calls on Thursday. Microsoft--which publicly announced that it paid The SCO Group more than $10 million for a Unix license last year--did not return press calls on the issue. However, it has denied past published reports that it played a hand in the BayStar investment in SCO.

SCO claimed the S2 consultant was misinformed, although some view the e-mail thread as a confirmation that Microsoft is quietly helping SCO fight a major Intellectual property battle against IBM, Linux and the general Public License.

Raymond said on his Web site that the e-mail thread was leaked to him by an "anonymous whistleblower inside SCO."

While observers question the nature of the leaked e-mail, excerpts written by Anderer to SCO executive Chris Sontag indicate that Microsoft has contributed significantly to SCO's legal war chest.

CRN fixed several typos and misspellings in the e-mail for clarity.

"Baystar is easy as they were just a Microsoft referral ... I realize the last negotiations are not as much fun, but Microsoft will have [brought] in $86 million for us including Baystar. The next deal we should be able to get from $16-20 [million], but it will be brutal as it is for go to market work and some licenses. I know we can do this if everyone stays on board and still wants to do a deal," Anderer wrote to Sontag. "Microsoft also indicated there was a lot more money out there and they would clearly rather use Baystar "like" entities to help us get significantly more money if we want to grow further or do acquisitions."