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SCO - What have WE Forgotten?
"Over the last eight months I have read countless posts on Slashdot regarding SCO and most if not all of the posts view the scene with rose-tinted spectacles. Promises are made that SCO will be buried and that McBride will find himself in prison, yet they are still there and McBride is still in charge. The men and women who play the stock market on a regular basis are no fools and something unknown to Slashdot readers made the SCO stock price rise by 2.4%, on December 26th, over half a days trading. If someone buys a stock they expect the price to rise, so what have WE forgotten that could be good news for SCO investors? The principle of 'many eyes' has been used by the Open Source movement before. Thousands of people examine source code, submit patches, and ensure that we give the best software we can to the community at large. Bugs are announced and fixed within hours and all of us know that this methodology provides a better solution than that offered by closed source products. We now need to apply the same methodology to the SCO problem, all of us need to consider what we know about this sorry affair and how we can legally contribute to the downfall of the SCO Group.
SCO have been ordered to produce their evidence against IBM by midnight on January 11th, 2004. This gives us [five days] to make sure that when the IBM lawyer marches into court he has a spring in his step, knowing that he has every Linux user on the planet behind him. THEN we can talk about SCO being buried, but not before.
Thank you for your time and a Happy New Year."
-- Cheers,
-- RLJ
First off, wonderful submission. It's well-written, well-meaning, and helpful.
t han-we-do dept.', the implication is that things work differently in the stock market. That's sort of the case, but not entirely.
Now, are things different on Wall Street?
I trade stocks for a living. Some of it is daytrading. from the category Cliff chose, 'from the daytraders-and-lawyers-live-on-different-planets-
The key issue here is potential; *if* SCO wins, it'll win $3B plus leverage vs every single linux user (if collectable, $699/installation for single-cpu installations, more for more processors; also $39(?) per embedded device). The payoff is huge and Wall Street functions on potential and leverage.
What does this imply (or explain) about SCOX and said stock price?
I once read an insightful quip in an investment article about SCO; the quip was 'Buying SCOX is like buying a lottery ticket'. Meaning, there's a huge potential payoff but, chances are, you'll get nothing. The SCOX stock price, hence, is an average of the perception of those two extremes.
2 years from now, SCOX will either be worth $100+/share or $0/share.
In conclusion, the rising stock price is a function of Wall Street's perception of the odds of this lottery ticket.
RD
Everyone's forgotten what SCO is actually suing IBM for. It's not copyright violation. It's not patent violations. It's a contract violation.
The crux of the matter, as I understand it, is that SCO is claiming that the SystemV contract specifies that they retain control over everything developed for SysV Unix -- regardless of who actually does the development. If you want to kick this back into copyright law (which is likely to become relevant), then they're saying that whatever you made is a derivative work. Even though you may license the SysV code it doesn't mean you can do whatever you want with derivative works.
There's a shitload of smokescreening going on, and SCO has made some really amazingly stupid claims (mostly their execs, not their lawyers, although the lawyers have made some stupid claims as well), but it really does get back to this -- is SCO's read on the contract the proper one? It's not a cut and dried answer. The contracts are very old, have passed through many hands, and have several court cases associated with them. The wording isn't clear either.
Personally, I still think SCO's smoking a big crack rock -- their interpretation of the contract is overly broad and utterly insane. But IANAL.
A coworker (ok... technically my boss) asked me yesterday when I expected the lawsuit to be resolved. I immediately replied 5-10 years.
Anyone who thinks that this is going to be finished before then is smoking one right along with SCO.
It is not very far-fetched to assume that SCO's tactics have been almost solely targetted at boosting their shareholder value. This year might be different however. If SCO doesn't come up with concrete irrefutable evidence to support their claims they might end up hurting the very shareholders they have been trying to appease.
Unless...they get taken over by some bigger company with an eye on the pie they have baking...
What I'm trying to get at is that with a market capitalization of merely 250 million and with the intellecual property claims they are making they are begging for IBM or (maybe even) Microsoft to buy them out.
Far fetched? Probably. But imagine if the SEC & the European regulators were to allow such a thing to happen?
(just remember where you heard it first)
Mark my words! After SCO gets slapped around in court, Darl & Co. dumps their shares, SCO's stock price plummets, and stakeholders get all pissed off, this will end up one of the worst (and most publicized) corporate scams in recent memory.
Socialism: A feeling of discontent and resentment caused by a desire for the possessions or qualities of another.
It is incorrect to assume that all investors in the stock market -- or even a majority of them -- are making decisions based on sound data.
There is one theory that is widely regarded in the investment world, usually called the Efficient Market Hypothesis. It states that the stock market is efficient, that at any given time all public factors relating to a given issue (company) have been considered by intelligent investors and that the price of a company's stock always accurately reflects the value of the underlying business.
The problem with this theory is that it is utter nonsense. People buy companies based on all manner of crazy metrics: whether a certain football team won, a company seeming like a "sure bet," or some charlatan hawking the latest penny issue (that he purchased in large quantity before making the recommendation.) And price, by the way, is determined by supply and demand.
Now, that might make for a very boring story, but it is relevant in the following manner: there is another valuation model that more accurately reflects the way the stock market actually works.
It's called the Greater Fool Theory.
The definition of the Greater Fool Theory has changed over time, but a current definition is: a fool buys a stock without any sound fundamental analysis hoping to sell it at a profit to a greater fool, who expects in turn to sell it at a profit to a still greater fool. Rinse and repeat.
SCO may well have a case. I really don't know, but you all had better believe that the Greater Fool Theory played a big role in SCO's meteoric rise.
But what if whoever is behind this actually wants SCO to lose? Might an IBM victory actually be engineered to be Pyrrhic for Linux?
Consider that both SCO's case and the GPL revolve around the notion of derived work which is legally up for grabs. Might SCO's claim -- that all things UNIX belong to them as derived works -- get laughed out of court in a way that actually weakens the somewhat similar provisions of the GPL?
What if the goal was to downgrade the GPL to a legal equivalent of LGPL or even BSD? (The GPL hopes to make "linking" a criterion for "derived". Is SCO trying or even in a position to make such a claim and get it struck down? I don't know.)
Yes, I realize the situations are different (contract law here, copyright law there), and this hardly explains the investor frenzy on SCO. Still maybe worth keeping in mind...
Indeed, perhaps we need to remember Enron and many other companies. High stocks for quite awhile, even stayed up despite many whisperings of problems, and finally plummeting down to nothing. It wasn't because any of these companies had something special, they just acted like they did and allowed others to fall for what they though was "easy money"
Here are some rather random thoughts:
;-)
- patience. "we" keep forgetting to be patient
- focus. "we" got baffled with bullshit alright
- history. "we" should have *started* with looking into the USL/BSDi case. That's where it'll end and it was very predictable.
- agendas. "we" are stupid to follow the "ememy of enemy equals friend" idea. Distrust Novell. Distrust IBM. Trust me on this
But most importantly, IMHO "we" forgot "our" role in all this. "We" played right into SCOs hand with the endless detail delving. No one but "us" cares. All they see is freaky commie geeks. Of course Darl knew and knows that. He made "us" jump on command. People have rightfully called him the comic relief but to most outsiders so are "we".
So what then? Here's something: sit and wait, perhaps document what happened when if you feel the need to. Write a book about it, someone will (please don't let that be JonKatz or ESR).
We have forgotten that the stock market has its own rules.
There are many reasons why SCOX is rising this year. One has been mentioned a couple times already: The lottery ticket theory.
Then, once a stock is rising, it usually drags investors in. Definitely the dumb kind ("oh, it's going up. Must buy"), often the smarter kind, who plan on selling it again as soon as it shows signs of dropping.
Also mentioned already was that SCOX doesn't exactly have a huge volume, so it can be moved by fairly small trades.
And you can bet that Canopy and other investors do everything they can to drive the price up. It is, after all, part of their "net worth".
It all boils down to this: Even if SCO is doomed to fail in the end, from an investment perspective, it can be smart to buy them right until the moment said end starts to happen.
The lawsuit certainly has a much smaller impact than you think. It is easily overshadowed by the press releases and quarterly reports.
Disclaimer: I used to work for a broker, but only for a short time and it's been a while.
Assorted stuff I do sometimes: Lemuria.org
I think the article is indicating that the stock price hints that there might be more behind the company than what we see in the anti-SCO press. The stock is rising. Is there something that the anti-SCO press is missing about the company? or is it a suckers' bubble?
I tend to take any stock that comes from Provo with a grain of salt. Provo is the MLM capital of the world. Here is another Utah Valley company: The Dream Mine was revealed to a prophet about a hundred years. It is not a traditional mine. The mine actually leads to the hidden vault of treasures buried by the Nephites. FYI, the Nephites were from a lost tribes of Isreal that came to America on a submarine a few thousand years ago. They got all the best treasures. But the Lamanites (American Indians) were horrible sinful creatures. They killed all the Nephites. The Nephites buried all of their treasures before the final battle.
The trick to the mine is that the secret entrance will not be revealed until God is getting ready to smite the gentiles.
This investment is great if you wish to hedge against Armagedden, and the stock tends to do quite well, despite the fact that it won't have a product until the end of the world.
Unfortunately, you have to be of the faith to own stock.
SCO is likely just another dream mine. As mentioned early, the faithful have a long history of falling for every MLM and get rich quick scheme you can name. They often get burned. Of course, if the case comes before a jury of the faithful, SCO will win big time, regardless of the merits of their case.
The Utah Court system is SCO's ace in the hole. If the jury thinks that ruling in favor SCO would make Utah Valley the new Bellevue, then they might rule for SCO. Regardless, I would be worried about shorting SCO or any penny stock from Utah, as Provo Stocks have certain irrational characteristics.
Because trustworthy information of this kind of information normally isn't available, investors make their investment decisions without first looking for "something like Groklaw".
Some investors will think "hmm maybe SCO actually has intellectual property in Linux, in that case their stock is grossly undervalued"... even if they consider the probability of that to be pretty low, it will appear reasonable to them to have a small (in relation to their total portfolio) SCO investment.
Some investors will think "I sure hope that this doesn't work out for SCO because I have investments in companies which will be hurt if GNU/Linux isn't free anymore", and they may decide to buy some SCO stock as part of a risk management strategy (to prevent unacceptable big losses in the case that an SCO victory kills GNU/Linux).
Some investors will think "Those SCO statements sound like utter nonsense to me". These won't buy, but they won't sell either - because they don't have SCO shares, and because "shorting stock", i.e. borrowing shares with a promise to give them back at a later date is difficult (impossible for small-time investors?) and very risky (even if we know that SCO stock will go down in the long run, it is quite possible that they temporarily might go up by say a factor of five for a short period of time before then, and if that's the time when you have to buy because you promised to give back those shares, you lose a *lot* of money).
The above analysis shows two categories of investors who are inclined to buy and one category of investors who are not likely to take any action.
This is consistent with the observed share prices.
It will not backfire on the evil men who started this mess, it will backfire on the idiots who have their (or their clients') money 'invested' in that company when the music stops.
I invest in shares on a fairly minor basis and was so appalled by the boom of the late 90's (Warren Buffett: 'how are these companies ever going to make money?') that I got out altogether for a while. I missed some massive profits - as we probably all have here - but totally missed the subsequent crash as well. I finally started coming back in at the end of 2001.
The problem back then was that shares were vastly overvalued but kept on rising because they were rising. The charts looked great and pension-funds managers who pulled their funds out of these overvalued stocks were sacked shortly afterwards because their funds were underperforming.
Then came the crash and we all got burnt. That is even forgetting companies like Enron or Worldcom.
It even looks to me as though SCO have learnt from those two companies. They are filing their correct figures and their broken business-plan with the SEC. No fraud there. People who invest there will deserve all they get, the only question is the timescale.
Mielipiteet omiani - Opinions personal, facts suspect.
One thing to remember, is that the SCO stock price is based upon absolutely nothing. It even went *up* on the negative news of SCO having to give IBM discovery evidence.
There *are no* fundamentals for this stock.
SCO no longer has a product.
SCO no longer has any customers willing to stick around except for the few who absolutely need legacy software.
SCO has totally blown its future market, c.f., "we view contracts as something to use against our customers"
What has inflated SCOX's price?
1. Market manipulators painting the stock price during low volume.
2. Shills on MSNBC and elsewhere promoting the stock with bad information.
3. Darl & Co's "let's put out a press release every time the stock sags". "Journalists" eat this up and quote them in MSNBC and Forbes.
4. This is the most important one. Short interest. There is so much short interest right now that there are few stocks to be borrowed at all to short. SCOX is shorted up the ass. With no supply of stocks to buy or short, the price gets driven up.
Is the price up because anyone thinks that SCOX has any case against IBM? Nope. The discussion on Yahoo's SCOX bulletin board consists of two sides: pumpers and dumpers. The dumpers usually argue (99 percent of the time) with facts culled from Groklaw and other places. The "strong buys" are nothing but "sound and fury signifying nothing"
Those of you who are kicking yourselves for not buying SCOX in March shouldn't feel left out. This stock is only good for day traders and gamblers. The question is not *whether* the stock will tank, but *when*.
--
BMO
This is a little silly since there is no way on this planet 18m people would pay $699 a license to use Linux. They'd switch to FreeBSD instead, or to a version of Linux with the tainted code removed.
SCO knows it won't get revenues from anyone other than Fortune 1000 corporations. They say explicitly in their FAQs that home users are not going to be asked to pay. Someone on Slashdot actually tried to buy a license, with the comic result that SCO admits the licenses are not being sold to the public at large.
If each Fortune 1000 corporation has 100 Linux systems scattered to and fro, that's about $70m. Each company would be asked to cough up $69,900 each. If SCO genuinely has a case, the Fortune 1000 companies will almost certainly cough up, since $69,900 is a tiny fraction of the legal bills they would have to confront from defending a lawsuit.
$70m in revenues for SCO is going to look pretty good, even as a one-time thing. Those are the real stakes they're playing for.
Intriguingly enough, this gives them a 17% chance of winning, or about 1 in 6.
Thoughts?
D
The wheel is turning, but the hamster is dead.
In terms of employees, IBM is 6x bigger than Microsoft.
In terms of revenue, IBM is almost 3x bigger than Microsoft.
In terms of revenue per share, IBM is almost 15x bigger than Microsoft.
IBM is the worlds' largest software company, not Microsoft. It's just that IBM bundles their software w. services and hardware.
SCO fails the "Dad's good bet" test MISERABLY--and as such it is NOT a reliable investment (more on that below). It is of course wise to be diligent in looking for any "ace up the sleeve" that SCO may have. However it is too soon after the .com bubble for most to forget that stock price means little to nothing about how well a company operates, and even less about its future prospects.
.com bubble because these companies had NO "STUFF" to back their huge valuations--only business plans, expenses and ad campaigns. They held no real estate, had no inventory, not even significant intellectual property (proprietary software, patents, licensing deals and so on). If a stock looks interesting, make sure it's backed by some TRUE value
My father is recently retired and in the past few years has invested a portion of his savings in stocks, mainly on TSX (Toronto exchange). My father and koreth (author of the parent post) are two of very few people who seem aware of the "interesting fact" regarding stock funds performance against market indeces.
In the stock market, it seems generally to be a VERY BAD IDEA to make investments based heavily on the forecasts on market conditions and the performances of key industres and so on. My dad has had the most long term success by almost completely IGNORING trends forecasts proclaimed by the "experts" and looking at a companies current and past performance vs. its stock valuation. Some criteria are:
1. REAL assets vs capitalisation - Dad never bought into the whole
2. Is the company making money. Dad looks at the whole TSE and on the first pass he drops EVERYTHING that doesn't meed a certain PE ratio as a safe investment, REGARDLESS of what headlines they are making or press releases they are making. Dad didn't get into BRE-X for a reason--they were making headlines about a big gold find but WERE MAKING NO REVENUE YET. The find turned out to be a scam and those who gambled too long lost it all.
3. Do they issue dividends...that is a bonus...and if they do re-invest the dividends they issue back into more of the same stock. You can set it up so essentially you get shares instead of cash and you can avoid brokerage fees.
Pretty simple...and you hold everything you buy until you need to cash out or a periodic review of your investments fails to pass all your criteria. DO NOT let fluctuations in stock price--up OR down--scare you into buying or selling, EXCEPT when said fluctuation causes the stock to move outside the criteria you set as a good investment bet.
Everything else is a gamble--invest your lottery ticket money in it and nothing else.
BTW SCO fails MISERABLY as a safe investment--it fails 1. as its assets are currently next to worthless in comparison to its market valuation--and the only thing that'll change that is winning the IBM case, AND commandeering BSD since Linux users would likely move en-masse to BSD should Linux become expensive and closed. Very inlikely. It fails 2 because it doesn't make NEARLY enough revenue to pass the PE ratio test. AND because if 2. it can't do 3--pay any sort of meaningful dividend.
FYI, the Nephites were from a lost tribes of Isreal that came to America on a submarine a few thousand years ago.
The submariners were Jaredites, who supposedly came straight from the Tower of Babel. Nephi and friends just had an unremarkable ship. Also, in the traditional interpretation the Lamanite ancestors all came on Nephi's ship; it wasn't until people examined Native American DNA that the idea of unmentioned Siberian-descended Lamanite groups became popular.
The Utah Court system is SCO's ace in the hole.
Not yet, it isn't. Judge Wells certainly doesn't seem to have a pro-SCO prejudice, and at the rate the McBrides are going the case may never make it to a jury trial. Even if it gets that far and SCO's lawyers somehow manage to get a biased jury, Novell has as much of a "hometown Utah company" appearance as SCO does, and based on their statements and copyright filings Novell looks like they're going to bat for our side.
Regardless, I would be worried about shorting SCO or any penny stock from Utah, as Provo Stocks have certain irrational characteristics.
I'd be worried about shorting SCO because every stock (especially every thinly traded stock) has certain irrational characteristics. If there are suckers out there who will pay $20 a share for SCO, how do I know there aren't suckers who would pay $40 a share?