Baystar Confirms Microsoft Behind SCO Investment

Bruce Perens writes "Business Week has confirmed that Microsoft arranged the Baystar investment in SCO. A managing partner of Baystar says the call wasn't from Gates or Ballmer. But it wouldn't have to be, would it? Obviously, there's more investigation to do." Reader skreuzer writes "Yahoo Finance is reporting that SCO announced that the company's board of directors has authorized management, in its discretion, to purchase up to 1.5 million shares of SCO's common stock over the next 24 months. SCO has approximately 14.4 million shares of common stock issued and outstanding. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes." Newsforge (which is also part of OSDN) is also following the story.

Comments

Tell the truth, dammit

[Lord Grey]

Well, this certainly flies in the face of at least one previous report, doesn't it? From that linked article:

Blake Stowell, SCO's director of communications, acknowledged that the leaked memo is real.

But, Stowell claimed, pundits had mischaracterized the memo's context. "We believe the e-mail was simply a misunderstanding of the facts by an outside consultant who was working on a specific unrelated project to the BayStar transaction and he was told at the time of his misunderstanding. Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction."

Responding to the allegations, a Microsoft spokesman said: "The allegations in the posting are not accurate. Microsoft has purchased a license to SCO's intellectual property, to ensure interoperability and legal indemnification for our customers. The details of this agreement have been widely reported and this is the only financial relationship Microsoft has with SCO. In addition, Microsoft has no direct or indirect financial relationship with BayStar."

(Emphasis mine.)

Golly gee, I wonder what they're trying to hide? Anyone?

Re:Tell the truth, dammit

[stephenisu]

In the state of underhanded tactics that MS has been known to use (I mean, they are a large corp, you don't get THAT big without playing dirty, or being free), I am not at all surprised. Next thing you know, they are gonna give free copies of Office to people who influence buying for their companies....

/Obvious tag needed

Re:Tell the truth, dammit

[quakeroatz]

Well I'm convinced. If a Microsoft spokesman said they have "no direct or indirect financial relationship with Baystar" and Stowell (SCO) said "Microsoft did not orchestrate or participate in the BayStar transaction."...

Then:

1) They must be telling the truth.
2) This must mean they had no involvement in the SCO suit.

??!?!?

Golly gee, can I have another hit off that crack pipe?

Re:Tell the truth, dammit

[falonaj]

Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction.

Well, if a Microsoft representative called Baystar from his private phone during a holiday, then it was technically not Microsoft who orchestated this.

I wonder if Microsoft could be sued at all for unfair competition if Bill Gates chose to openly fund SCO shares from his private money?

Re:Tell the truth, dammit

[Danse]

It wouldn't matter who made the call or when, as long as the money came from Microsoft. If it came directly from BillG himself, then it still wouldn't matter would it? He's the head cheese of Microsoft, and his money comes from Microsoft too, doesn't it?

Re:Tell the truth, dammit

[lacrymology.com]

"Next thing you know, they are gonna give free copies of Office to people who influence buying for their companies"

OH PLEASE! No you've gone too far... they would never go that...

D'OH!
-m

Re:Tell the truth, dammit

[Nexus7]

Spake Blake Stowell:
"Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction."

This if I understand correctly is commercial speech. I wonder how the judges in the many instances of barratry that SCO has indulged in will like the fact that SCO is trying this in the court of public opinion, influencing juries, and all of that with bare lies. Not clear either how the so-called business channels that get all indignant and prissy over Martha Stewart can barely get themselves worked up to even report this. C'mon folks, this is a good and evil story like no movie ever seen.

Re:Tell the truth, dammit

[fishbonez]

"Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction."

"Microsoft has no direct or indirect financial relationship with BayStar."

Those two statements are very close to lies but may just be deceptive statements that omit very important facts. I say this because it actually appears that Paul Allen orchestrated the SCO investment. I say this because:

1. Paul Allen is a former member of the board of directors of MS and the second largest shareholder. Paul Allen now serves as a senior strategy advisor to top Microsoft executives.
2. Paul Allen is one of the largest investors in BayStar Capital.

So Paul Allen is in a position to advise and influence both MS and Baystar. He also has significant financial holdings in both companies. There is no tinfoil hat necessary to draw this connection.

Re:Tell the truth, dammit

[B'Trey]

No one is suggesting that the money came from Microsoft. Microsoft brokered the deal - they arranged for Baystar to give SCO the money. That way they could truthfully claim that they were not the source of SCO's money.

Re:Tell the truth, dammit

[Elektroschock]

As far as I know is Microsoft obliged not to enter the UNIX market due to earlier agreements. The downward spiral of SCo may affect Microsoft as well. When Sco's management would go to jail because of license fraud it will probably affect Microsoft managers too.

Scosource Gregory Blepp (hired from SuSe) was many times very close to break the injunctions on the German market. If SCO tried to sell licenses or spread FUD at CeBIT, Hanover the rapid response would be to report the offence to the police and let them put the managers in jail.

Re:Tell the truth, dammit

[BiggerIsBetter]

C'mon folks, this is a good and evil story like no movie ever seen.

No it isn't. To most business-minded folks, MS isn't evil - it's the pinnacle of corporate success. This is just how the game gets played. If it's illegal then sure it might get press, but just being dirty scoundrals isn't enough to get anyone interested.

Re:Tell the truth, dammit

[js3]

did anyone read the article?

Would he be interested in investing in SCO, they asked? Goldfarb wouldn't identify the executives, but says neither Chairman William Gates nor CEO Steve Ballmer were among them. He says Microsoft didn't put any money into BayStar or the SCO investment.

so if microsoft didn't put any money into it why would baystar invest in SCO.. just for the hell of it?

Re:Tell the truth, dammit

[edbarrett]

As long as the Bush Administration is in [O]ffice

No no no, that's Clippy. Although I can see where you could get confused...

Re:Tell the truth, dammit

[k_head]

What a damning indictment of capitalism when you can automatically presume that any large company is unethical by default. That's it's impossible to grow a company without playing dirty.

Re:Tell the truth, dammit

[RoLi]

Probably not, but Microsoft isn't afraid of lawsuits (and why should they?), they are afraid that people see through all the SCO-mess as a meaningless FUD-campaign.

Re:Tell the truth, dammit

[k_head]

" No one is suggesting that the money came from Microsoft."

Not yet. If people keep digging I bet they will find the body sooner or later. Why would a bank make a 50 million dollar investment just because MS said so? Doesn't that seem weird to you?

Re:Tell the truth, dammit

[Saeed al-Sahaf]

Well, if a Microsoft representative called Baystar from his private phone during a holiday, then it was technically not Microsoft who orchestated this.

Nonsense. If a Microsoft representative calls up SCO on Christmas eve from pup someplace in Christchurch while wearing a pink tutu, and that person has their cell phone signal bounced off of the solar reflectors on the Mars rover, relayed through several satellites and sketchy third world telephone exchanges, bounced through sever P2P nodes and then piped into the PBX of the Mormon church, if that person is representing the interest of Microsoft at the request of superiors, then yes, technically Microsoft "orchestrated this."

Re:Tell the truth, dammit

[Kierthos]

Well, let's face it. Look at the news. Enron, Arthur Anderson, Martha Stewart/ImClone, Haliburton, K-mart, Wal-Mart, WorldCom, AOL Time-Warner, the various SCO follies, Xerox, various energy companies, and so on, and so on...

Bad news sells. It also promulgates faster then good news. So, maybe all of capitalism isn't doomed, but not for lack of trying by these companies.

Kierthos

Re:Tell the truth, dammit

[cyanics]

Lets pose a hypothetical situation:

SCO starts wins over IBM, Linux becomes illegal.

Microsoft, who is now apparently backing SCO, aquires SCO in a take-over. Microsoft now owns the rights to UNIX and a significant portion of Linux.

How can it be a monopoly, if there is no competition?

Re:Tell the truth, dammit

[Taladar]

*searches for the "+5 Scary" Moderation*

Re:Tell the truth, dammit

[Filmwatcher888]

D'OH!

No.... DOD!

Re:Tell the truth, dammit

[SillySlashdotName]

Well, if a Microsoft representative called Baystar from his private phone during a holiday, then it was technically not Microsoft who orchestated this.

Wrong. If an employee, in the preformance of assigned duties or at the direction of their employer - or even just with the knowledge of the employer, or if the employer SHOULD HAVE KNOWN - performs an illegal act, the company is responsible. In addition, the company does not lose their liability if the employee is told to wait until a non-working day and use a phone other than their office phone.

If the employee, on their own, with no knowledge or approval, or expectation of approval of their employer did whatever evil and nefarious act, then the employer is not responsible or liable.

In this case, if a person identified themselves as a Microsoft representative to BayStar and in some way gave BayStar the idea that Microsoft was interested in BayStar doing a deal with TSG, and BayStar, acting on the belief that it was in fact a Microsoft representative and a Microsoft request, entered in to the deal with TSG, then Microsoft IS technically "orchestrating this."

I wonder if Microsoft could be sued at all for unfair competition if Bill Gates chose to openly fund SCO shares from his private money?

Interesting thought. The answer is "No, to a point."

If B.G. buys stock on the open market, he is buying from some other individual that owned the stock. D.McB. might like that - especially if he is buying the stock from D.McB. - but TSG (the company) would derive no benefit from the transactions.

Up to a certain point he doesn't even have to declare his stock ownership (I believe it is around 5% of outstanding shares) - and it would take a much larger number of shares to actually be able to manipulate the actions of the company.

The BayStar transactions, on the other hand, directly funded the further operations of TSG - including the attacks on Linux (and Linus) which seen to be in line with (and possible intended to further?) Microsofts' interests.

Remember that there are things that a free marke company CAN do that a MONOPOLIST CAN'T do. This would seem, in my opinion, to be one of those things...

Re:Tell the truth, dammit

[brlancer]

What a damning indictment of capitalism when you can automatically presume that any large company is unethical by default. That's it's impossible to grow a company without playing dirty.

No, he said it's impossible to grow that big without being partially dirty. I always love that people criticise "big government" while believing corporations don't have the same faults, or vice versa. Power corrupts.

It is a proven fact Microsoft has played dirty, often blatantly illegal. When you view companies of that size, there is a preponderance of evidence that they have all done something dirty. No one is claiming they are the mafia, but they've all done things which were unethical even if they weren't always illegal.

As for Capitalism, it's broken by design; it requires third-party regulation by force else the bigger powers will bully the smaller powers and so on down the line. I won't speak for other countries, but regulation in the U.S. can't keep up with innovation and so you often get bad regulation or no regulation. Hence how Microsoft, and plenty of others, managed to continue for so long unchecked. From what I've seen, other nations have the exact same problem.

Re:Tell the truth, dammit

[MullerMn]

"It looks like you're trying to funnel money to your corporate buddies and turn the country into a police state by 'liberating' the shit out of some foreign country. Would you like any help?"

Re:Tell the truth, dammit

[Stephen Samuel]

Cooling the wildfire of linux through it's Unix underpinnings (elidged)

Oh, Linux has definite and real UNIX underpinnings, but what SCO 'owns' (or claims to own) isn't UNIX. SCO has the rights with respect to the code base that was once known is System V, which was a version of unix. There are other versions of UNIX.. some of which have an AT&T beginning and some of which don't.

The name "UNIX", and the right to call something "UNIX" devolved to a group that has no relation to SCOG. What SCOG controls now may, or may not, qualify today as "UNIX". On the other hand I believe that at least one release of Linu has it's UNIX certification proess.

This part is not unusual.

[GMontag]

A managing partner of Baystar says the call wasn't from Gates or Ballmer. But it wouldn't have to be, would it?

Nope, it would not have to be a "tip-top" person, just has to be a Principal or someone with delegated authority from a company officer to be valid. This is not anything uncommon at all.

Yahoo Finance is reporting that SCO announced that the company's board of directors has authorized management, in its discretion, to purchase up to 1.5 million shares of SCO's common stock over the next 24 months. SCO has approximately 14.4 million shares of common stock issued and outstanding. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

This is nothing new, odd, illegal, unethical or strange either. It is a common business practice of publicly traded firms.

Now, the underlying story is where the problem sits, not with the scenery.

Re:This part is not unusual.

[BigFire]

This is nothing new, odd, illegal, unethical or strange either. It is a common business practice of publicly traded firms

Not when they're a couple of quarters away from insolvency. Stock buyback usually occurs when a company with low stock price have too much money on hand and no viable avanue of investement available.

SCO qualified 2 out of 3 catagory, but they most definately do not have too much cash on hand.

Re:This part is not unusual.

[cmoss]

They say that they are initiating a buyback because the stock is a good value.

This confilicts with the fact that ALL recent insider trades are sells.(after exercising options)

Re:This part is not unusual.

[vinsci]

Yahoo Finance is reporting that SCO announced that the company's board of directors has authorized management, in its discretion, to purchase up to 1.5 million shares of SCO's common stock over the next 24 months. SCO has approximately 14.4 million shares of common stock issued and outstanding. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes.

This is nothing new, odd, illegal, unethical or strange either. It is a common business practice of publicly traded firms.

It would certainly be unethical if it's just the Canopy Group's way of transferring money from SCO to Canopy, in exchange for soon-to-be worthless SCOX shares. That's not unlikely, seeing what kind of deals Canopy has done with the companies they own in the past.

That might even count as inisidertrading, depending on circumstances we can't know about, so chances are it's illegal, too.

I guess they could defend themselves by saying it's been common knowledge for a long time that SCO is about to go out of bussiness. Of course, then they'd have been lying about their bussiness prospects... Oops!

Re:This part is not unusual.

[mefus]

Someone on groklaw.net the other day suggested they might do something like this in the very near future, as they were nearing the "support" point in their continuing stock decline.

Re:This part is not unusual.

[NecroPuppy]

Part of me is wondering who they are going to buy the stock back from.

Boise is due 400,000 shares.

If Baystar/RBC provide some or all of it, it's a sweetheart deal where SCO redeams Baystar's investment, costing them nothing (they are just making shares up), and then buys them back, writing off the same expense twice.

Baystar/RBC get their money, and SCO gets yet another chance to cook the books.

Re:This part is not unusual.

[k98sven]

Not when they're a couple of quarters away from insolvency. Stock buyback usually occurs when a company with low stock price have too much money on hand and no viable avanue of investement available.

SCO has $50 million from the BayStar deal, with a redemption condition if the stock goes below ~$8.50 for 25 consecutive trading days.

In light of that, initiating a buyback-scheme when the stock started dipping close to this mark is completely expected. Losing the BayStar investment is a much bigger loss than what it'd cost SCO to keep the stock price inflated.

Re:This part is not unusual.

[indigeek]

This is nothing new, odd, illegal, unethical or strange either. It is a common business practice of publicly traded firms.

I don't know about unethical or illegal, but it is certainly odd. A buyback occours only when the company feels that the share prices are too low. Now if the prices are low now, they certainly were low a few months back at 50 cents or so. What has changed between now and then which causes the values of the company to grow 18 fold? Even if we assume SCO's lawsuit has merit now, we must then assume that it had merit then.Its not as if Linus added code worth 17 times the value of SCO into the kernel in the last year. And SCO certainly must have known either way.
So either the lawsuit is odd or the buyback is odd

I would think this is a simple trick to use shareholders money - the company capital - to buymore shares, thus inflating the prices artificially. This would let the "insiders" sell their shares, celebrate a "going bust" party and go off to the Caymans. And then, it would be both unethical and illegal

Re:This part is not unusual.

[benploni]

SCO has $50 million from the BayStar deal, with a redemption condition if the stock goes below ~$8.50 for 25 consecutive trading days.

Mod parent up. That is exactly what is going on. That's why they initiated the buyback.

Re:This part is not unusual.

[SubtleNuance]

Well, it makes complete sense. Use SCO capital (from MS) to buy SCO stock. Increase SCO stock price. Sell your own shares. You couldnt have MS pay money DIRECTLY to the SCO principles could you? I mean, really, running SCO into the ground with this obviously un-winnable ANTI-GNU/Linux crusade would mean that the SCO board would be purposefully destroying SCO -- they'd end up in Jail for not properly administering SCO.

This is a perfect method of actually paying SCO directors to destroy SCO* for the benefit of M$.

*not that SCO really had a chance w/ x86 unix -- GNU/Linux is going to dominate ALL Unix in short order.

Where's the incentive to profit?

[monstroyer]

Anyone still denying that FUD isn't an instituted marketing practice of Microsoft, even after being convicted of monopolist practices, can now bow their head in shame.

Business Week is in no way a Linux Zealot and even they confirm that Microsoft enjoys competing on a level far removed from technical innovation.

What was to happen at the end of these shenanigans? Once the lawsuit is over, where does SCO expect to get it's money? It's not like Microsoft will continue to invest in them once this crap is over.

And does this come out of the MS advertising budget? Any advertising against our competitors is good PR? There is no way MS could re-coup anything from this other than FUD points. Where's the incentive to profit?

Re:Where's the incentive to profit?

[molarmass192]

Once the lawsuit is over, where does SCO expect to get it's money?

Dude, SCO doesn't have a long term continuity plan! McBride and his cronies are all set to cash out about this time next year. Once McBride flys the roost he'll probably turn around and sue SCO himself for something like he typically does. The stockholders will be the ones left holding the bag in the end and it's why I still can't understand why SCO isn't a penny-stock.

Re:Where's the incentive to profit?

[dnoyeb]

Dude, next year? Everyone but McBride has been selling their shares like nobodies business. The only thing we are waiting on is McBride to sell his. I think he had some restriction on selling, but I believe that is far gone by now.

SCO is not a penny stock because SCO is a quality marketing (FUD) machine. SCO is not a software company. Once you accept that, their situation makes sense.

As for the stock holders, the majority of them are institutions at this point. Slight majority though. The stock is so illiquid who could afford to be in it but big players.

Re:Where's the incentive to profit?

[njdj]

There is no way MS could re-coup anything from this other than FUD points. Where's the incentive to profit?

Are you serious? Destroy Linux, and the only current threat to the Microsoft monopoly is gone. Every time a company buys Microsoft instead of installing Linux because of fear of lawsuits, that's more profit for Microsoft. Microsoft had every incentive to fund the SCO lawsuits.

IANAL, but I'd like to see a lawyer comment on whether Microsoft could be convicted of conspiracy to violate antitrust laws.

Business week couldn't confirm it...

[bc90021]

...but rumours abound on Wall Street, that Lucifer, LLC, may secretly be behind the entire arrangement. "We can't confirm it", said one source who wished to remain very anonymous, "but we know that with soul trading trending upward, it can only be that Lucifer, LLC is on a buying streak." He continued, cautiously, "It seems, though, that the souls Lucifer is getting aren't of the highest quality."

Ironically, a spokesperson for Lucifer, LLC, could be reached, and did indeed comment. "Oh, yes, we're snatching up all the souls we can. There's only two companies in this space right now, and being half of them, we're trying to beat out Heavenly Productions, LP. If they hadn't sunk so much capital into, and gotten so much great PR from that new movie, we might have been able to grab several more souls during the deal. We're betting, though, that soon enough, there will be promises that need to be kept, and then executives of 'certain companies' will be ready to sign their souls over."

When pressed, the spokesperson would divulge nothing further about the companies, except that one of them was in a desert\, and the other in a dreary woodland area. "All I can say is that it doesn't seem to bother these execs, since they seem to have chosen areas much like our [Patent Pending] HELL world."

Heavenly LP, privately held, had no comments. Lucifer LLC was up slightly on the day.

now...

[domenic v1.0]

if only microsoft would invest that time and money into their security initiative.

Re:now...

[Anonymous Coward]

No, it's all a misunderstanding... We thought they meant "Security Initiative", but what they *really* said "Securities Initiative".

Countersuit potential?

[Junior J. Junior III]

Is there any potential for a counter-suit here? This really seems like unfair behavior on Microsoft's stifle competition via a proxy corporation who'll do their dirty work for them. I hope someone can mount a counter-suit on behalf of the Linux community, and somehow defeat the MSFT legal juggernaut.

Re:Countersuit potential?

[Rich0]

I wonder if you can pierce the corporate veil here.

The money given to SCO is probably a significant chunk of their total equity now - I don't know offhand how much ownership it purchased, but you might make the argument that SCO is a front for Baystar. Next you need to look at the contributions that Baystar got from MS and how big they are relative to the equity of that company. If you can show that SCO is acting as an indirect-front for MS, then you can probably sue MS for resulting damanges.

If give a friend $100k to "take care of somebody for me", and they give a friend $80k to "take care of this problem", and then my problem disappears from the face of the earth, the police can come after me. If I set up 12 layers of shell companies and went through them, I'm still on the hook. RICO laws and all that - the gangsters were trying to avoid getting caught with this kind of stuff since the start of the last century. The laws are there.

I would think that the best bet for prosecution would be from the state antitrust lawsuits against MS. While most have settled regarding past offences, I'm sure that this settlement doesn't cover future offences.

Not bad

[the Man in Black]

"LIAR! LIAAAAAAAAAAAAAR!" -- Carol Kane, The Princess Bride

While I understand that this isn't illegal as such, isn't it an SEC violation?

The SCOundrels' Follies

[the_flatlander]

With their legal proceedings floundering, they've fallen to cynical stock market games in an effort to shore up their sagging fortunes.

(Have you watched their stock making a run at zero over the course of the week?)

The Flatlander

Does this surprise us?

[robpoe]

The evil empire will stop at nothing until it achieves world domination. But, unlike SCO, the do not want to get their hands dirty - they want to appear as the benevolent kingdom...But would stop at nothing to hire professional (or in SCO's case - unprofessional) hit men to rid the world of the evil competition...

Oh well, move along - nothing to see here..

But at least we didnt have to wait until 3:56 PM for our SCO fix..

it seems that it's not even about code

[Neuropol]

it's all a corporate powerplay. ms and sco need to get over themselves and get back to the task at hand. computing.

CYA time, Mr. Goldfarb

[grub]

Mr. Goldfarb is trying to look like an honest man while distancing himself and Baystar from MS and SCO. He readily admits that "senior executives" from MS phoned him but won't name names. He's scared. Leaked documents and an unmanagable conspiracy of silence are forcing him to admit to snippets of truth which paint him and the firm in the best possible light.

I don't get it

[shrykk]

I don't understand. SCO, crappy dying company, takes millions-to-one shot on a huge payoff (or was praying for IBM to settle). Retarded but plausible. But why would Microsoft want to back such a chancy scheme? Bad publicity when the case fails must more than make up for the FUD they've managed to spread.

Re:I don't get it

[Penguinisto]

...because "the enemy of my enemy is my friend."

It doesn't take science to figure out that a company with $40bn in idle cash and nothing better to do with it would have no problems with tossing some of that dough into throwing its competition under a cloud of doubt.

Re:I don't get it

[1s44c]

Your right.

Microsoft would gain a lot of SCO was proved right. But they must have had their legal team look at the situation and report that SCO was just wasting its time.

The best Microsoft can hope for is to spread FUD.
The worst Microsoft could see is the GPL reinforced in court, and a hell of a lot of bad PR for their company.

It's a bad deal from Microsofts point of view.
Microsoft didn't get where they are now though bad deals.

Re:I don't get it

[isn't my name]

MS signaled this back with Halloween VII.

Interestingly enough Halloween VII was making the rounds in Sept/Nov. 2002. It was in August 2002 that SCO brought in Morgan Keegan to try to find cash for them--and it was likely Morgan Keegan who both brought Boies on board and negotiated the original "license" deals with SUN and MS.

Re:I don't get it

[tres]

It says a lot about just how worried the MSFT corporate entity is about competing against Free software.

Microsoft needed a stalling tactic. Two years away from the next-gen OS, security problems riddling their current offerings, and Linux is picking up steam. They absolutely needed something like this. It may have been a "bad deal," but I'd say MSFT was never looking to profit from this investment.

If SCOX had actually won a case, it would have been a bonus, but that wasn't the point of the investment. MSFT wouldn't want anything out of this but to put off adoption until they could fill the gap left by their current offerings.

Re:I don't get it

[thue]

Your post presumes that MS is omnescient. Perhaps they thought that SCO had a better chance of winning that they appear to have now.

Consider that MS probably got a good deal of their information from SCO. There is no reason to assume that SCO was any more accurate with their estimates towards MS than they are towards us. And MS at the time they made their informed (or misinformed) choices didn't have the benefit of all the information that has become available in the last months.

Re:I don't get it

[GSloop]

Think of a drowning man.

He'll drown you too in his fear when you try to rescue him. Doesn't matter that if he drowns you, he drowns himself too - he's irrational.

IMHO, MS really is scared. They really don't have a lever to use to defeat Linux.

You can't buy them out. You can't give it away free, and beat them on price. (Linux IS free, and as a bonus, the source code is included.)

MS knows the power of "Free" - that's what got office in the door - OEM bundles of free office suites. Free inclusion of IE etc.

So, what alternatives are left to attack Linux. Of all the alternatives, this seems the most powerful - attack the IP foundations of Linux. It's still a weak attack, but, IMHO, probably the best they could come up with.

Cheers,
Greg

SCO stock price

[falonaj]

It seems obvious that SCO's announcement to buy back shares is just another way to raise their stock. But I doubt that many potential investors will trust this announcement - it is very unspecific with such a two year time span. At least during the version trading hour today, the stock didn't exactly jump too high up.

Nail 'em!

[Orien]

I hope they finally get nailed on this one. I knew that insider trading would never stick because 1) they sold off a bunch of stock, but the price has only gone up so it wasn't a "sell before it drops" ploy ala Martha Stewart. 2) It was easy enough to say they were low on cash and sold the stock to get equity. Now this whole scandle seems a lot more viable. Let the witch hunt begin!

About stock.

[mindstrm]

There is a common misconception out there that stock price directly affects a company... it does not.

If I purchase a milliion shares of SCO on the open market, SCO does not see a PENNY of that money. The only time SCO sees money from the sale of stock is when SCO issues NEW stock into the market.

So.. if the stock price goes up, it's good for a company, in that they can issue more stock, and get more capital without giving away such a large piece of the pie.

However, microsoft buying a million shares of SCO would not by itself fund sco at all.... unless they bought those shares FROM SCO, which it doesn't sound like they are doing.

Re:About stock.

[Fnkmaster]

Baystar did a PIPE deal with SCO. See here for an explanation of PIPEs. This is when a private equity firm infuses capital to a publicly traded company by acquiring newly issued securities directly from the company at a discount to the current market price - not buying them on the open market. So the Baystar deal DID infuse money directly to SCO, though you're correct that the market price and open market transactions don't directly affect day to day operations of the company and don't directly feed cash into the company's coffers.

Of course, a good market price makes it much easier to raise more money in a follow-on public offering, PIPE or other kinds of transactions.

Re:About stock.

[gfxguy]

That's somewhat misleading...

If the company is holding 50% of it's stock in reserves, and the stock price doubles because there is a perception that the stock is desirable, they've just doubled the value of their reserves.

Moreover, all the executives who own stock in the company have more reason to keep up the fight, because they will personally gain.

Re:About stock.

[fedork]

This is true, BUT
SCO does not get the money, but people who holds the stock (for example our beloved Darl) do get it.
So it may not be "SCO", but people at SCO...

Re:About stock.

[tjwhaynes]

If I purchase a milliion shares of SCO on the open market, SCO does not see a PENNY of that money. The only time SCO sees money from the sale of stock is when SCO issues NEW stock into the market.

Ahh but if SCOG buys SCOX stock, say at a low price during a profound slump in their share price and does so in a manner as to not cross the written words in the SEC constraints on such purchases then you can get into fun with the accounting department.

Now - you only buy back stock if you

• have surplus cash
• believe that the current share price will be exceeded in the future and you can make money by selling that stock later.
• or you wish to be able to write off a loss against tax by playing games with your own stock.

Yes - a company doesn't benefit directly from swings in its stock price, but it can benefit by trading in that stock. Even when that goes sour, clever accounting practices can help you recover that loss in other ways. I haven't peered too closely at SCOs recent manoevres but I seem to remember that any dip in share price allows them to record the conversion of the Series A convertible stock deal with Baystar as income. So you can have it both ways.

Cheers,

Toby Haynes

Like no one saw this comming

[4b696e67]

It has been long speculated on here that Microsoft was bankrolling SCO. Now with proof, lets hope that this MS/SCO FUD about the Linux source is seen for what it is by the corporations and most of all the courts.

Guess Who Invests in Baystar? Paul Allen

[Anonymous Coward]

Paul Allen is an investor of Vulcan Capital, and they invest in Baystar. There's your connection.

Now every time I read about SCO..

[Channard]

.. I get the same 'nefarious ties' feeling that I do reading about one of Scientology's front groups, eg Narconon etc.

Re: Don't worry about Microsoft

[Gannoc]

(Score:-1, Flamebait)
by Gannoc (210256) on Thursday March 11, @10:59AM (#8532136)

With Bush in office, you don't have to worry about the communists keeping microsoft from making money.


This isn't flamebait, it is bitter, pessimistic political commentary. I have plenty of Karma to burn...

Why stock buybacks?

[Anonymous Coward]

They claim it's a good deal for them to invest in
themselves, but is it normal for a company with
seriously dwindling revenue streams to "invest" in
their own stocks? No! So waht purpose could this serve?

They can buy stocks at low market value now and later
sell to a "private investor" at highly inflated prices
with the "investor" saying it's a good deal based upon
Deutche Bank's long term prediction of $45 value and
thus re-fund the SCOG legal war chest.

SCO is part of the Illuminati conspiracy

[miskatonic alumnus]

Someone linked to this on Groklaw a few days ago. Anyone who's played Steve Jackson's "Illuminati" will get a kick out of it: SCO/Illuminati

Re:Microsoft bailed out Apple

[Jim_Maryland]

Yes, but wasn't that to keep at least one competitor around to show that MS isn't a monopoly? It would be very difficult to defend against lawsuits if you were the only OS vendor for the desktop market.

3:56 PM - funny you should mention that...

[Chordonblue]

SCO painted their stock with quite a few shares starting at 3:55 PM yesterday. Call up a chart on SCO and look very carefully at the last few minutes. The line continues on it's downward pace then all of a sudden *bang* shoots up a few points.

THAT my friends is desparation! To explain their obvious fooling around they came up with some sort of stock buyback scheme today hoping that no one will notice their tinkering.

The litmus test of this

[goombah99]

I have a litmus test to propose. but first some analsis. Why would a tanited recommendation from Microsoft be useful to baystar? I can understand from baystars position why they might invest in SCO for their own selfish reasons: if they are a company that specializes in high-risk high-reward investments then the SCO investment can be argued logically as a win for SCo would have a huge payback. You might disagree on the odds but well that's their bussiness and the odds*payoff actually is not so bad looking.

But why would microsoft recommending SCO be a useful thing to baystar? Microsoft supposedly has no financial dealing with baystar so there's not "favor" to be granted here. And Microsoft obviously had a vested interest in giving the advice and I'm sure baystar was smart enough to see through that--so the advice would have no tangible use.

KEY point: The most benign explanation is that they were merely bringing it to baystars attention and presumbaly did so to many other companies. The key test is then: did they or did they not call hundreds of other speculative investment houses in hopes of convincing one with this long shot advice?

If they did not do so with many other companies then why did they think they had any standing to cold call baystar and give tainted advice? If they just called baystar alone then its very fishy. they must have promised other tangibles. Such as investing in companies baystar recommended back or promising cash influxes and supprt for the lawsuit.

Re:The litmus test of this

[dzelenka]

This is an interesting point. I won't need to ask others to mod you up.

My guess is that there is a chain of "buddies" that connect the two companies. This deal was closed over a beer (...or a soda in Utah). This connection will be impossible to find or prove. We will also never be able to discover overtures to other "speculative investment houses" because of a similar lack of paper trail.

Re:The litmus test of this

[jeabus]

It doesn't matter which, or how many, investors they contacted. MS is not in the investment analysis business, they're in the software business. The only real question is why is MS seeking investors for SCO? SCO is a competitor after all. Is MS also seeking investors for Apple and Red Hat?

Behold the next move from SCOX/MSFT

[patrixx]

The ability to run Linux without Linux!
(http://www.sco.com/products/lkp/faq.html)

Linux Kernel Personality FAQ
For UnixWare 7

What is the Linux Kernel Personality?

The Linux Kernel Personality (LKP) is a feature of the UnixWare 7 operating system which enables the installation and the direct, native execution of Linux(R) applications. The primary attributes of LKP are:
Exploit the power and scalability of the UnixWare kernel to run Llinux applications. the Linux Kernel Personality contains most of the RPMs required to execute native Linus applications, but it does not include a Linux kernel.
Applications compatibility: Linux applications install and run without modification. UnixWare 7 customers now have a powerful tool to assist in the migration from Linux to UnixWare.
UnixWare 7 feature availability: Linux applications can benefit from the features and options available for UnixWare including a journaling file system, RAID support, and increased scalability, security and reliability.
Versatility: Users can dynamically choose either environment, Linux or UnixWare 7 or mix both, as needed.

Didn't SCO suspend its Linux product line?

Yes. The Linux products were suspended due to intellectual property issues associated with Linux. The LkP feature doesn't contain a Linux kernel, and therefore to the best of our knowledge, there should be no infringement issues. If the prior statement were proven inaccurate, SCO would take appropriate steps. In the meantime, the LKP feature is available to assist customer migration from Linux.

Why is The SCO Group(R) doing this?

SCO recognizes that many customers want to migrate away from Linux, but can't afford to disrupt their day to day operations, nor can they afford the engineering resources to port and test the Linux applications in a UnixWare environment. The Linux Kernel Personality addresses all of these concerns. Native Linux applications runs unchanged on UnixWare, which provides the following benefits to the customer:
Customers can asses using UnixWare in their environment without making costly application program changes.
Customers who want to migrate to UnixWare, but some of the source code for critical applications they need to continue to run is no longer available.
Customers are considering migration to UnixWare but are concerned about the risk of changing both the operating system and the application at the same time.

Does LKP emulate a Linux application environment, much like lxrun?

No, LKP is not a Linux environment emulator. An LKP installation includes the Linux application environment running on a UnixWare kernel. Unlike the LxRun environment, LKP doesn't contain an emulation layer.

How can I install Linux applications? Do I have all the tools?

Yes, you can install Linux applications. Linux libraries and system tools, including the rpm installer, the shell utilities, and the configuration files, are provided in UnixWare 7. The UnixWare 7 installation loads the entire (former) Caldera OpenLinux Server system, with the exception of the Linux kernel.

How is Linux compatibility provided?

LKP is a standard feature ofUnixWare 7. LKP and the necessary OpenLinux RPMs are part of the basic media kit.

Do I get a full Linux distribution with UnixWare 7?

LKP does not provide a Linux kernel. With the exception of the Linux kernel, however, the entire Linux distribution is installed in a /linux directory.

Is the use of Linux applications transparent?

Yes. Linux ELF binaries are treated as first class executable programs. The Linux process coexists with other UNIX processes and shares the system equally. You run with Linux shells and desktops and use familiar Linux tools and utilities. The system keeps track of your environment for you, so that Linux and UNIX functions and utilities do not collide.

How can I access the Linux environment from UnixWare 7?

Run

Re:Behold the next move from SCOX/MSFT

[FuzzyBad-Mofo]

I can only wonder at the number of GPL violations that surely exist in that software. I would advise companies to steer clear of such legally encumbered software, and use the free and clear Linux or BSD operating systems instead.

This will all work itself out.

[presearch]

What's cool about this is that any involvement with Microsoft, no matter how compelling
it may seem in the beginning, is the kiss of death for the other company that gets involved
in a "deal" with Microsoft. They can't help it. Win-Lose is the only outcome that's acceptable to M$.

How this works out to Linux users is unknown, but SCO's fate is sealed:
Ignominy, disgrace, failure, collapse.

I've got GREAT news!

[Chordonblue]

"So, SCO's claims against IBM (and the rest of the world) have turned out to be legit?"

"No... I just saved a sh!tload of money by switching to Geico!" :)

SCO *HAS* To Buy Back Stock

[Anonymous Coward]

It's so nice of SCO Group to announce a buy-back program, but you'll note that these buy-backs do not have to occur on the open market.

1. SCO Group must buy back shares from certain investors because of their stock price and the looming failure to file the PIPE registration.

2. This is an excellent way for Canopy to liquidate its holdings in SCO Group.

The average investor won't make a dime, and will likely be left holding the bag on this one.

Gates or Ballmer

[LittleLebowskiUrbanA]

The call wasn't directly from Gates or Ballmer?

So what?! That's like saying a Sgt in the Marines actions in Iraq weren't directly ordered by Bush or Cheney. It's what we call in the military the chain of command or maybe the commander's intent. In other words, the commander lets his troops know what he wants done and how much freedom they have accomplishing this goal.

I believe Gates and Ballmer knew what was going on.

1984 RELOADED

[goerge_o]

Watch the trailer of the upcoming movie starring famous M$,SCO,Groklaw and others on: www.bravegnuworld.org Sums it up pretty nicely :-)

it's about SEC

[wotevah]

I think it is more of a preemptive reaction to the SEC investigation rumours. So that later they could say that they genuinely believed in this, otherwise why would they plan to buy 1.5 million shares.

Re:Doctor, the voices keep saying...

[Anonymous Coward]

Do they say 'Scoe' or 'Ess See Oh'?

[OT] Re:Darl at McDonald's

[mefus]

buy hot coffee at McDonald's

I think you are misinformed about that lawsuit.

McDonald's knew people were burning themselves, and they continued to heat their coffee to extremes just short of boiling.

They provided a "to go" cup that would collapse from the pressure if you tried to lift the cup full of coffee with your hand.

To mitigate that they provided an equally flimsy lid that would support the shape of the cup.

It was the kind of lid where you peel some of it back to be able to sip the coffee.

The woman that was burned did this while seated in her automobile. The lid collapsed and fell off the cup when she peeled it back. Then the cup collapsed in her hand. Then the near boiling coffee spilled out onto her lap, and gave her second degree burns on her labia and genital area.

The executives at McDonalds knew this was happening and didn't change their policies on the serving of coffee.

Re:[OT] Re:Darl at McDonald's

[the_flatlander]

The executives at McDonalds knew this was happening and didn't change their policies on the serving of coffee.

Quite right. Moreover, it was the jury, which became angered over McDonald's callous disregard for their customers, (this was far from the first such case), that ordered the enormous reward. The Plantiff had only asked to have her legitimate medical expenses covered.

Sorry to rant but, I hate how the facts of this case get left behind in the rush to engage in hyperbole over it.

The Flatlander

Re:[OT] Re:Darl at McDonald's

[cornjones]

Exist but go to a fund. THis fund could be for any number of things (something should be picked) but I prefer free legal consultation services.

Legitimate cases

[LinuxGuyFriend]

Good day,

Apart from the fact that SCO seems to have any case at all, the SCO situation brings up a potential situation where IP infringement really occured. Perhaps it even occured in their case as well but we'll never know for sure because of all the BS they created.

What would happen if a company that doesn't release its code in the open source domain, gets parts of its source added to an open source project. For example, by an open source oriented employee? A number of reactions from the company would be possible, mostly to try to limit the damages to its business model.

Such reactions could include:
-Getting the infringing code removed and hope it hasn't spread everywhere; and/or
-Suing the project, the employee, any user for damages; and/or
-Taking it and moving on

I imagine that option 2 would attract a lot of ire from the slashdot crowd.

Conflict of interest

[voss]

It would be interesting to find a shareholder of baystar that opposes the SCO investment, and get them to sue baystar for an investment that is a conflict of interest and not in the best interest of that fund.

baystar is making investments based on outside concerns and not the fidicuciary interests of their shareholders.

The facts as they are being reported...

[Spoing]

1. Baystar was contacted by some executive from Microsoft Corp. about Baystar investing in SCO two months before Baystar did.

2. The executives were not BG or SB.

3. There was not an investment made by Microsoft through Baystar.

OK, am I missing something or is this a non-story?

(Yes, I think that something slimy is actually happening...though evidence of it would be good!)

New site logo

[gmuslera]

Slashdot News about SCO. Stuff that could matter.

SCO had done enough merits in slashdot to win its own specific (i.e. no caldera, when they had that name not were so deep in the dark side) logo, section, faq entry, exceptions in slash code and even users-optional tagline pack.

Even when they lose their lawsuit (that seems less inminent than when all of this started) and the company is closed, buried and sold even the chairs and the pencils of it, still will be for years news about sco and their directors here (i.e. Darl McBride raped in prison, or even die in poverty, from the remember-when-we-roared dept.).

Anyway, this story is more about Microsoft than about SCO, but well, Microsoft had the merits since the start of Slashdot and if there was nothing done about them yet, maybe never will.

Because They Face No Consequences

[MooseByte]

"But why would Microsoft want to back such a chancy scheme? Bad publicity when the case fails must more than make up for the FUD they've managed to spread."

Because they face no real consequences? They've never had to pay any reasonable penalty for their behavior. Giving away free copies of MS products?!? That's a marketing expense, for cryin' out loud! "Allowing" hardware resellers to add something to the desktop? Oooooh! The pain! Make it stop!

So what, exactly, does MS have to lose with even such a bizarre scheme as this?

Paul Allen does not invest in BayStar

[isn't my name]

According to the Newsforge article, Baystar specifically confirms that Vulcan does not invest in Baystar.

Of course, the same article indicates that Baystar refuses to staight that there are some MS or MS people investing in BayStar.

Fight back -- make plain OSS = jobs, MSFT != jobs

[fruscica]

From a discussion thread w/ MSFTie Robert Scoble:

Small businesses create most jobs (A Small Business Administration study found that nearly 77 percent of the 6.9 million jobs created from 1990 to 1995 were created by small businesses).

Open source software lowers capital barriers to market entry.

Proprietary software vendors will not create jobs for Americans:

"Technology companies are seeing a rebound in business, but top executives this week said any jobs added to meet growing demand will likely be in countries where labor is cheaper than the United States."

Reuters
February 27, 2004

So the OSS community should bring out its own heavy artillery, and just RELENTLESSLY hammer home the point that, ON THE WHOLE, OSS expedites job creation, MSFT et al. do not.

That is a message that will RESONATE, and hence make it politically untenable to allow MSFT et al. to practice such underhandedness with impunity...

IMHO :-)

Frank Ruscica 3/6/04; 3:40:29 PM

Frank, the problem is, that argument doesn't wash completely. Look at Greg Reinacker. He created a new company around Microsoft technology. And he's getting paid for it.

Most people don't understand how Linux creates jobs when it's given away for free.

Especially when they are getting fired from their jobs cause WalMart wants their products for less than it costs them to produce them.

Robert Scoble 3/6/04; 3:53:10 PM

Robert,

I lost you there...

Let's follow the money: if a small company uses LAMP technologies, the money it saves will go toward growing the business -- and hence, will generate jobs (that's how Linux creates jobs when it's given away for free). If the company buys licenses from a BigCo, the above-cited Reuters article tells us the money will not generate jobs for Americans.

My takeaway, then, is: whenever a small company can substitute OSS for proprietary software, the American job market benefits.

If Greg Reinacker is building atop MSFT technology for which no OSS substitute exists, he does not embody a true counterargument.

If he is building atop MSFT technology for which an OSS substitute does exist, he is hurting the U.S. job market...

Where Wal-Mart fits into this, I have no idea...

Frank Ruscica 3/6/04; 7:18:54 PM

Frank: that's a good theory. But, if a company can't afford Windows licenses, don't you think it's likely to offshore its labor too?

Microsoft money does create jobs. 5000 in the past year alone (mine was among them).

Also, the argument is that you can get the same done with open source software that you can with stuff you pay for. Really? I didn't know that GIMP is as good as Photoshop. I don't know any print shop that accepts files from an open-source version of Illustrator. There's tons of things that you simply can't do with open source. Also, if you're a small company you probably can't afford a Linux geek to be on staff. When I helped run a camera store, I surely couldn't afford a geek on staff.

Most of the cost of software is NOT in the acquisition of it. If it were, your argument might have some merit.

Robert Scoble 3/7/04; 3:04:23 AM

Robert,

You wrote:

>Also, the argument is that you can get the
>same done with open source software that you
>can with stuff you pay for.

Incorrect. I wrote:

"My takeaway, then, is: whenever a small company can substitute OSS for proprietary software, the American job market benefits."

Also, to be clear, by 'substitute' I implicitly mean(t): replace at You wrote:

>if a company can't afford Windows licenses,
>don't you think it's likely to offshore its
>labor too?

From the standpoint of making a data-driven determination, of course all we have to go on here is historical precedent. But the log

Provides Protection from Short Sellers

[barfy]

Why the stock buyback...

Once there are significant amounts of short sellers vs the float, the stock price becomes essentially manipulated by the short sellers. IE, the very action chases away buyers, which forces the stock down, which causes the market makers to start selling and lowering the price to attract buyers to the shares that the shorts are selling etc etc, until the stock price is run into the ground...

One way to short circuit that kind of activity, is to create some sort of floor in the price. A company can do this, by becoming a buyer of thier own stock at a given price. By providing buying action, the shorts are not rewarded, they stop selling the stock, and the behavior of the stock normalizes.

There is no gaurantee this will work. Though it generally works most of the time, but it can be a war of attrition. Similar things happen with national banks and the currency market. And sometimes the banks lose after spending BILLIONS attempting to keep it from happening (Argentina, Mexico, Thailand, just to name a few).

Holy smoking gun batman!

[goombah99]

The above poster is totally correct. Here is a link to the PDF file from Baystar's own website. On page 3 of this there is a chart showing the top ten investors in Baystar. Number one on this chart is Vulcan Ventures which has 1.8 billion dollars invested in Baystar!!!!

It's ALWAYS a quid pro quo

[mbkennel]

E.g.: Hey Baystar, go invest in this loser trog company to fight our battles, and when we need to do some investment banking transaction or investment, we'll make sure you can get a sweet part of the deal with a really big commission.

Or, Steve and Bill said they'd put alot of money in your hedge funds if you work on this little problem of ours.

Nothing written of course.

it doesn't take too much imagination to think of plenty of reasons.

So?

[andih8u]

He says Microsoft didn't put any money into BayStar or the SCO investment. A Microsoft spokesman says that the company has no "direct or indirect" financial relations with BayStar, but declined to comment when asked whether execs called BayStar to suggest investing in SCO.

Okay, so Microsoft didn't actually put any money into it, they simply called Baystar and told them investing would be a good idea? That's a pretty thin rope to hang someone by.

Help me understand...

[GreenCrackBaby]

Lawrence Goldfarb, managing partner of BayStar, says that senior executives at the software giant had telephoned him about two months before the investment. Would he be interested in investing in SCO, they asked? Goldfarb wouldn't identify the executives, but says neither Chairman William Gates nor CEO Steve Ballmer were among them. He says Microsoft didn't put any money into BayStar or the SCO investment. A Microsoft spokesman says that the company has no "direct or indirect" financial relations with BayStar, but declined to comment when asked whether execs called BayStar to suggest investing in SCO.

Help me understand this....

You manage a fund that has $400 million available for investment. Microsoft does not put any money in your fund. Senior executives from Microsoft call you up and say "Please put $50 million into this company called SCO."

I'm sorry, but why did the fund's managers do what they did? It doesn't add up. You do not just invest 1/8 of your available capital because some guy calls you up and says, "hey, please do this."

Re:Help me understand...

[a_n_d_e_r_s]

Well Paul Allen a high ranking executive in Microsoft and its 2nd largest shareholder is also the largest investor in Baystar.

So it probably just wasn't some guy.

pithy analysis, a good chart

[puzzled]

See lilmissmolly0, before she is buried under a flood of stock manipulator noise:

http://ragingbull.lycos.com/mboard/boards.cgi?bo ar d=SCOX

This one sort of tells the story - there was an ask of $9,000.00 on SCOX yesterday close and a bid of $0.01 - definitely interesting times for the SCOX management.

http://finance.yahoo.com/q/bc?s=SCOX&t=5d&l=on&z =l &q=c&c=

OH MY GOD: microsoft is 9th largest baystar invest

[goombah99]

Cant beleive I missed this in my previous post: On that same chart which is dated 2002, it also list Microsoft as the 9th largest investor in Baystar. So paul allen is the number on investor in baystar (1.8 billion) and Microsoft has 0.6 billion invest baystar.

all of the other major companies investing (janus, Warburg, Putnam, wellington, citadel) are just brokerage houses and are not going to be activist partners just passive investors. Thus microsoft and its senior advisor paul allen are in the driver's seat at this company

SCO only allowed to buy employee shares

[isn't my name]

This is a repost from the Yahoo SCOX board. Apparently, there is a clause in the PIPE deal agreement that says SCO cannot buyback shares, but they can buyback employee shares.

So, unless we are about to see another SEC document modifying the PIPE deal, then this 1.5 million announcement is either BS to prop the stock price or SCO is about to reward a bunch of insiders:

Restrictions on the A1 Pfd
by: thwackamole 03/11/04 11:49 am
Msg: 108276 of 108282

Going along with a previous poster's comments, it appears (to me) that the indenture on the A1 preferred stock prohibits them from buying back shares in excess of those issued for employee stock options.

Otherwise they could ship all of BayStar's money to Canopy.

So this buyback is basically a non-event.

So long as any shares of Series A-1 Preferred Stock are outstanding, the Corporation shall not take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Majority Holders:

(v) redeem, repurchase or otherwise acquire, or declare or pay any cash dividend or distribution on, any Junior Securities. Notwithstanding the foregoing, the Corporation shall, without the prior approval of the Majority Holders, be entitled to repurchase Junior Securities from employees of the Corporation in connection with employee compensation plans approved by the
Corporation's Board of Directors;

Riggggggght.

[digitaltraveller]

I doubt it's Paul Allen.

If (and I stress if) the senior management in question was Paul Allen, he should be going to jail. Wall Street does not take pump and dump schemes lightly and that's exactly what this is; except in this case SCO is the proxy, rather than the principle in a zero-sum game.

MS political contributions aside, the SEC is the least likely federal agencies to bend to political pressure because their credibility is what keeps the market in check. Pissing them off is not a good move. It wouldn't have been Paul Allen, his lawyers couldn't possibly be that stupid.

Hmm. avoid the public light?

[linuxtelephony]

From the Newsgorge article:
This will allow SCO to repurchase its shares from time to time in accordance with the requirements of the Securities and Exchange Commission on the open market, in block trades and in privately negotiated transactions, depending on market conditions and other factors, the company said.

Does this mean SCO can buy the stock options from McBride and others without having to go through the publicly traded market? Would this be a way for the execs and other higher-ups to hide their dumping of stock? In a private trade, couldn't SCO pay *more* than market value if they wanted to?

BayStar and M$

[Saeed al-Sahaf]

Actually, the second item, Microsoft has no direct or indirect financial relationship with BayStar, is probibly technically true. At this point.

If I "suggest" to someone that they invest in something that I have no finantial interest in (SCO), that "suggestion" does not create a finantial interest. At this time.

I speculate that M$ "suggested" to BayStar that sometime in the future, perhaps, maybe, the software giant might possibly make some kind of investment in BayStar, of course totally unrelated to any investments BayStar might have made in SCO, hint-hint-wink-wink...

What's funny is that a few months ago when all us paranoid tin-foil hat folks where saying M$ had their fingers all over this, people said "go back in your basement, way too much illuminati, blaw, blaw, blaw..."

This makes no sense

[rudy_wayne]

If Microsoft invested $50 million in SCO, that would make sense. $50 million can buy tham a lot of anti-Linux FUD. But what does Baystar gain? When SCO loses their absurd lawsuits and disappears, so does Baystar's 50 million.

Transcript of the Phone Call

[ahodgkinson]

NOTE: In order to preserve privacy, some names have been changed.

BayStart operator: Hello, BayStart Capital, How my I direct your call?
Caller: Yeah. Dis is Mario. I wanna talk to da boss. Now!
Baystar operator: One minute please.
Goldfahnder: Hello. Goldfahnder here.
Caller: Is dis da Boss o' BayStart?
Goldfahnder: Excuse me?
Caller: Are you da Boss of BaySta?
Goldfahnder: Oh. Yes, my name is Lawrence Goldfahnder and I am the managing director of BayStart Capital. What can I do for you?
Caller: Yeah. Dis is Mario, I'm a friend of Bill, see. And Bill told me that youze guys gotta send some money over to SCO. Got that?
Goldfahnder: What? Who is this?
Caller: I told you already, Mario... A friend of Bill's. Ya don't get it, do ya? Bill says that you gotta give money to SCO.. or else! Got that? Or do I gotta come over and stick your head down the toilet an' clean your ears?
Goldfahnder (somewhat surprized): Ahm, erm. Are you suggesting that we should invest some money in SCO?
Caller: Yeah. Jez, for a smart guy like you, you sure are dumb. You could call it investment.. or whatever. Just send over money... a lotta money... now.
Goldfahnder (shakily): Yes, Mr. Mario. I'll see that it gets done, right away.
Caller: That's more like it. You do that, and don't make me come over and visit you... click.

strange feeling

[chadseld]

I'm a little freaked out that the conspiracy theories we came up with at the beginning of this whole thing might actually be true.

This part is most unusual.

[Pontiac]

I picked up this little tidbit from Thwackamole on the SCO Yahoo Forum

So long as any shares of Series A-1 Preferred Stock are outstanding, the Corporation shall not take any of the following corporate actions (whether by merger, consolidation or otherwise) without first obtaining the approval (by vote or written consent, as provided by the DGCL) of the Majority Holders:

(v) redeem, repurchase or otherwise acquire, or declare or pay any cash dividend or distribution on, any Junior Securities. Notwithstanding the foregoing, the Corporation shall, without the prior approval of the Majority Holders, be entitled to repurchase Junior Securities from employees of the Corporation in connection with employee compensation plans approved by the
Corporation's Board of Directors.

What the heck does that mean? basically without a majority vote they can't buyback stock from anyone except employee's..
Hmm that would be people like the CEO and other senior executives??

To put it another way they just gave executives a 13 million dollar payday.

Jumping to Conclusions

[youngsd]

If you actually read the PDF, you will see that you (and Wired, for that matter) are jumping to conclusions. The chart showing Vulcan Ventures (and Microsoft, for that matter) is a chart of data from PlacementTracker showing the overall number of PIPE deals. The vast majority of which have nothing to do with Baystar. This paper is Baystar's way of convincing people that PIPE transactions are a good thing.

None of which is to say that Vulcan and/or Microsoft don't invest through Baystar -- just that this PDF says nothing about it.

-Steve

Any chance this will boost Linux adoption?

[criquet]

The "fact" that Microsoft is so aggressively attacking Linux should be a huge sign of how much Microsoft has determine Linux its biggest threat. Good signs for Linux's capabilities. Not so good for the community and consumers until this all subsides.

Interesting, lies, possibly criminal

[Performer Guy]

Now we can safely call SCO execs liars. It also means that SCO execs may have been caught lying to the Feds, and as Martha discovered we all know what that means.

This may ultimately prove to be one of the more significant developments in this sordid case when it comes down to any criminal investigation.

This makes no sense...

[EmagGeek]

A company that invests in life sciences pouring fully one EIGHTH of their total managed fund into a FLOUNDERING software company?

That makes NO sense... after all, when SCO dies, so do those 50 million clams...

Unless....

There were some back door agreement that indemnifies BayStar against total loss of that capital... say, for example, another memo were leaked that blew the whistle on such an agreement between them and a certain Redmond corporation..

Here's the confusion

[GreenCrackBaby]

Baystar's #1 largest investor, Vulcan Ventures is, for all intents and purposes, Paul G. Allen, Microsoft Co-Founder and major MSFT stockholder.

Baystar's #9 largest investor is Microsoft itself.

Where is the confusion?

Here's the confusion:

'A Microsoft spokesman says that the company has no "direct or indirect" financial relations with BayStar'

MOD PARENT UP...here's why.

[taumeson]

The Microsoft "representative" was an executive...and executives are empowered to make decisions for the company they are an executive of, no matter the time of day or whether or not they're in the office. Think about how many deals get made on golf courses, etc, and that'll give you an idea about when executives are able to conduct business.

SCOX is on the long slide downwards

[FatAssBastard]

Here is a chart of SCOX stock over the last 3 months. This makes me very happy, how 'bout you? :)

Re:Pump and dump theory out the window

[Vancouverite]

If the company is buying back their own stock, they must believe in their case. How can they be dumping if they're buying back outstanding shares?

Not quite true. There are several more reasons why a company might pursue a buyback.

1. A buyback announcement, in and of itself, will tend to push the stock price higher, which SCO would really like.
2. There is nothing in the announcement saying that SCO will buy back, only that they are authorized to do so.
3. The structure of the buyback program is such that SCO can choose who to buy back from, and at what price. A Buyback does not need to be at market prices. This provides a mechanism for buying off the shares of favored partners at greater than market, for buying the stock held by Canopy, or for paying the directors for their shares directly
4. SCO is using money raised by selling stock to buy stock? Seem a little circular to you?

Unfortunately, a buyback plan does not guarantee that SCO is not "...misleading people to inflate their stock worth". A buyback plan can be used for just that purpose.

In the end MS is good for us.

[aka_big_wurm]

They had them put money into SCO in the chance that really do own rights to the linux code. If it pays off they will make billions. Its like playing the loto for them 50 mil is like buying a 1.00 powerball ticket for a chance at 200 mil. If any of us had the chance to go back and invest in MS or Apple we would do it. MS has a chance to go back and invest in Linux. Now I am not a MS fanboy or anything, I really dont hope that SCO wins. But in the end MS is good for the software market. Why? Because they make all us software developers work harder to make our software better. Years ago people were saying IE would rule the world. For a while it did. However after Netscape went opensourse it has became a much better program than IE. One day Linux will be there but its not, it will be there when my mother can use a linux box.

The stock buyback bumped the price for one hour

[Animats]

Today's buyback announcement boosted the price of SCO stock for about an hour, between 0930 and 1030 EST. But it didn't help. Thursday's high is still below Wednesday's high, which was below Tuesday's high, which was below Monday's high. The stock is down 50% since December. and about 20% this week.

Note, that in typical SCO style, they didn't do a stock buyback, they announced a stock buyback.

M$ may have an option agreement with Baystar

[Recalcitrant Labrado]

Just a few comments on the original memo and Baystar's statements. The easiest way for Microsoft and Baystar to claim they have "No Financial Relations" with a straight face is for Microsoft to have given a "Put" option to Baystar. I'm betting that this is what they've done. This means that Microsoft has agreed to buy Baystar's SCO shares at some time in the future for a guaranteed price (ie baystar "puts" the shares to Microsoft). The option exercise price would be set so that Baystar therefore cannot lose money if SCO tanks and in addition would be guaranteed a substantial return on its investment. Baystar probably gets to keep the shares itself if SCO wins and its share price leaps. In other words Baystar is in a "can't lose" position and is probably set to double its money no matter what happens to SCO. If SCO needs more money Microsoft will "introduce" more Venture Capital funds to SCO after providing the VC firm with said Put Option. No VC in his right mind is going to pass something like this up. As for SCO's long term strategy (Don't get riled at the term "Long Term") it was obvious from the last para of original memo. I interpret it as saying that they intend to buy up whatever Unix IP they can find on the open market and use it as a foundation for even more lawsuits. The idea is to make themselves the dog in the manger in that no one is going to have clear title to anything involving Unix or Linux. Their exit strategy as it says in the memo, is to then sell their IP portfolio to Microsoft, who will of course make licences available for a small fee, or appropriate the whole thing as Microsoft Linux. So if you have any Unix patents in the cupboard, go and sell them to SCO;)