Report outlines Microsoft-SCO link

[Bombardier]

Senior Microsoft executives asked the managing partner of Baystar Capital Investment whether he would be interested in investing in The SCO Group about two months before Baystar made an investment, a report in BusinessWeek claims.

The BusinessWeek report said Lawrence Goldfarb was asked by senior executives of Microsoft, whom he did not identify, about his interest in making an investment in SCO.

He told the tech publication that Microsoft did not provide any of its money for the investment which Baystar made in SCO.

BusinessWeek also reported that a Microsoft spokesman had said the company had no direct or indirect financial relations with BayStar.

It said the spokesman was unwilling to make a comment on whether or not people from the company has suggested that BayStar make an investment in SCO.

The report comes in the wake of a leaked memo, sent by a financial consultant to top officials of The SCO Group, which resulted in the resurfacing of claims that Microsoft is funding SCO's ongoing legal actions against Linux.

The claims centre around a $US50 million investment made in the SCO Group in October 2003 by Baystar Capital Investment through which investors own an aggregate of 2,953,000 shares of SCO common stock representing 17.5 percent of the company's outstanding shares.

SCO filed a case against IBM in the US last March claiming breach of contract. It also claimed that Linux is an unauthorised derivative of UNIX and warned commercial Linux users that they could be legally liable for violation of intellectual copyright.

SCO later expanded its claims against IBM to US$3 billion in June when it said it was withdrawing IBM's licence for its own Unix, AIX. In July last year, SCO demanded that Linux users obtain licences for using what it claims to be its own UNIX code. Later in the year, SCO extended the deadline for obtaining these licences.

Novell has contested SCO's claims to ownership of UNIX and says that even though SCO has some UNIX rights, Novell has retained the right to compel SCO to waive or revoke any of its (SCO's) rights under the contract.

In Australia, the open source industry cluster Open Source Victoria has filed two complaints against SCO with the Australian Competition and Consumer Commission; a private firm CyberKnights has also made a formal complaint with the consumer watchdog.

http://www.smh.com.au/articles/2004/03/12/1078594551818.html

[DudeAsInCool]

I was with two people last night for dinner who used to work for the guy in question at Novell , and they weren't too complimentary about the old boss. They said the recent suits seemed like his fingerprints, and they volunteered (without me asking) that they didnt think Microsoft was underhanded here. I, like you, like them, dont trust Microsoft's tentacles...its one of the reasons Im a Macster. But this will be an interesting development to follow...let's see if your thesis plays out..

[DudeAsInCool]

Microsoft Said to Encourage Investment in SCO

Here's another look at the same story from the NY Times:

More evidence emerged yesterday about Microsoft'srole in encouraging the anti-Linux campaign being waged by the SCO Group, a small Utah company.

BayStar Capital, a private investment firm, said Microsoft suggested that it invest in SCO, which is engaged in a legal campaign against Linux, a rival to Microsoft's Windows.

BayStar took Microsoft's suggestion to heart and invested $50 million in SCO last October. But a spokesman for BayStar, Robert McGrath, said, "Microsoft didn't put money in the transaction and Microsoft is not an investor in BayStar." He added that Microsoft executives were not investors as individuals in the investment firm, which is based in San Francisco.

Mr. McGrath said the suggestion came from unidentified "senior Microsoft executives" but not Bill Gates, the Microsoft chairman, or Steven A. Ballmer, the chief executive.

Microsoft, Mr. McGrath said, is not indemnifying the investment firm against risk or otherwise indirectly supporting BayStar's move. "The issue for BayStar," he said, "is whether there is a good return on its investment in SCO."

Microsoft, Sun Microsystems and a few other companies have struck deals with SCO to license its technology. SCO owns the rights to Unix, an operating system initially developed at Bell Labs. SCO contends that Linux, a variant of Unix, violates its contract rights.

SCO's legal campaign began last year when it sued I.B.M., a leading corporate supporter of Linux, and recently stepped up its legal attack by filing suit against two companies that use Linux,DaimlerChrysler and AutoZone.

The defendants are fighting the lawsuits, saying they have done nothing wrong and challenging SCO's claim that its rights are as broad as the company contends.

Microsoft stands to gain most from any slowing of the advance of Linux, which is maintained and debugged by a network of programmers who share code freely. That model of building software is called open source development.

It is not particularly surprising that Microsoft, given its interests, played the go-between for an investment in SCO. "But this shows is that there is a lot more than meets the eye in SCO's litigation strategy," said Jeffrey D. Neuburger, a technology and intellectual property expert at the law firm of Brown Raysman Millstein Felder & Steiner. "SCO has an agenda, and Microsoft clearly has an agenda, and it's doing whatever it can to further its cause."

The extent of Microsoft's behind-the-scenes role in SCO's legal effort has prompted questions and speculation for months. Last week, a leaked e-mail message from an adviser to SCO to the company added to the controversy in the industry. In the memorandum, sent to two SCO executives, Mike Anderer of S2 Strategic Consulting discussed a role in financing SCO, writing that "Microsoft will have brought in $86 million for us including BayStar."

SCO acknowledged that the e-mail message, obtained by the Open Source Initiative and posted on the open-source advocacy group's Web site, was authentic.

But SCO added that it was a "misunderstanding of the facts by an outside consultant" who was not working on the BayStar financing. SCO added that Microsoft did "not orchestrate or participate in the BayStar transaction."

http://www.nytimes.com/2004/03/12/technology/12soft.html

A SCO spokesman, Blake Stowell, said yesterday, "We stand by that."