By Jack Ganssle

SCO

Published 8/15/2003

As most readers know, SCO (www.sco.com) has filed a $1 billion suit against IBM for the latter's alleged use of trade secrets in Linux. SCO claims some 168k lines of Linux code are theirs, were never released to the public, and remain valuable and private IP.

SCO's suit (http://sco.com/scosource/complaint3.06.03.html) complains that, by embracing Linux, "IBM set about to deliberately and improperly destroy the economic value of UNIX and particularly the economic value of UNIX on Intel-based processors."

Seems to me that Linux did that pretty much all by itself. One wonders (I bet Bill Gates wonders) if Linux hasn't destroyed the economic value of all desktop OSes.

The SEC's web site (http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001102542&owner=include) shows that SCO execs are selling now-inflated stock like drunken sailors. And why not? The stock is temporarily up while the company tanks. Their latest 10-Q (http://www.sec.gov/Archives/edgar/data/1102542/000110465903012299/j2045_10q.htm) does a wonderful job of obscuring the company's financial condition. A cursory reading indicates a tremendously profitable quarter. Read the notes: almost half of their revenue came from just two licenses signed that quarter. Will these deals continue to fill their coffers? Management warns "maybe not". R&D expenses plummeted in the most recent year, as did product sales. The company is engaged in plenty of non-IBM litigation. All signs of a company in peril.

The suit seems like a last-ditch act of desperation to salvage some value from a failing business. At least that's what I originally thought, till SCO announced a new twist in the plot: users of embedded Linux must pay the company a $32 fee for each embedded system shipped. Of course, $32 is the "promotional" pricing valid only till October 15. The marketing genius who came up with this bizarre offer thinks he's selling toasters, not OEMing a component of mass-produced embedded systems.

Microsoft's original Windows CE license fees raised howls of protest when in the $10-15 range. Since then CE is now mostly sub-$5. That, of course, is for an OS which is indisputably proprietary.

I'm not a starry-eyed Linux fan. There's a lot to love about it and more than a little to detest. But SCO's attack is legal bottom-feeding at its worst. Their new embedded charges do nothing more than feed the FUD factor that disrupts the industry. I can't believe anyone seriously believes SCO will collect these licensing fees, but ultra-cautious legal counsel at companies building embedded products may put embedded Linux in limbo for a time. Lawrence Rosen thinks (http://www.osdl.org/docs/qa_re_sco_vs_ibm.pdf) the suit could linger for years.

Fact: few embedded folks will pay a $32 per unit royalty charge. If SCO wins, Linux will fail as an embedded OS. Therefore, SCO will go out of business, at least in the embedded space. Therefore, this move is an act of suicide. Therefore, SCO management is insane. QED.