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McBride: Investment strengthens SCO's IP fight

SCO Group CEO Darl McBride has a fresh $50 million in his "war chest" thanks to an investor. McBride says the cash will help SCO protect its IP, among other things.

SCO Group CEO Darl McBride, suddenly flush with a $50 million investment from BayStar Capital, said Friday morning that the company's ability to enforce its intellectual property rights have been bolstered.

SCO, which leveled a $3 billion lawsuit against IBM Corp. in March charging that Big Blue had lifted code from SCO's System V Unix and illegally contributed it to the Linux kernel, called a press conference to announce the BayStar investment. However, much of the time was spent quizzing McBride on his pursuit of Unix licenses from members of the Global 1500 that use Linux.

McBride said the investment money would be spread between SCO's Unix business, its Web services development and SCOsource, the division within the company that manages and protects its intellectual property.

"I'm not going to spell out how the money is going to be allocated into those various buckets," McBride said. "We now have a war chest to take the company forward. This investment is an independent action with respect to how we enforce our IP rights. I'd say this strengthens it."

SCO announced Thursday that it would not pursue Unix licenses from commercial Linux installations, claiming several companies had stepped up and paid licenses and that it was satisfied with the progress.

"We're signing up additional deals. As we go down the licensing path, our goal is not to start suing companies," McBride said. "But if we find companies that are not paying, we reserve the option to go down the legal patch as a remedy to resolve that."

A Credit Suisse Boston survey this week revealed that 84% of CIOs polled were essentially ignoring the SCO threat. McBride turned that around to say that nearly 20% are concerned.

"For the short amount of time that we've been talking about this, I interpret this to mean that there are people who are concerned," McBride said. "I talk with Global 1500 companies all the time and there is concern. Our licensing helps resolve that and move forward. This is not a 100-yard dash. This is a marathon, and we're in it for the long haul."

McBride did not rule out the possibility of a settlement with IBM, but he reinforced that he believes this is not just an "IBM problem." IBM has filed a countersuit, as has Red Hat Inc. McBride said SCO has filed a motion in a Delaware court to dismiss Red Hat's claims of unfair and deceptive business practices.

BayStar Capital's $50 million investment gives it 17.5% of SCO's outstanding shares. Ironically, in a week when SCO decided not to pursue invoices for Unix licenses from commercial Linux users, the funding from BayStar boosts SCO's cash position to $61 million, McBride said.

"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, General Partner, BayStar Capital, in a statement. "SCO owns the most predominant UNIX software assets in the I.T. industry, has a 20 year history of providing trusted software solutions to end users around the globe, and an aggressive and seasoned management team focused on generating profitable growth."

Some users who provided feedback on Thursday's report that SCO would not invoice commercial Linux users were skeptical.

"If and when it is proven their claims are correct, then that is a different matter. At this point for SCO to threaten invoices on a product the have not proven to own is nothing short of extortion," said one anonymous reader. "The real reason they continue to stymie, balk and otherwise carry on with nonsense is they know they have no valid case. It is their hope they can find an appropriate court environment to hijack Linux."

SCO also extended a self-imposed deadline to double the price attached to its Intellectual Property License to Oct. 31. Stowell said SCO did not put the license on its price sheets until last month and accordingly extended the initial pricing structure. Currently, SCO is asking for $699 for single-processor Linux servers, $1,149 for dual-processor servers, $2,499 for four-way servers and $4,999 for eight-way machines. SCO was also seeking $199 for desktop implementations and $32 for embedded devices. Those fees will double on Nov. 1.

FOR MORE INFORMATION: news exclusive: "SCO halts Linux invoice effort" news exclusive: "Red Hat pads fund to fight SCO, files complaint"

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