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MS sells stake in SCO, and a chapter closes

A long time ago, Bill Gates said 'Dos 2.0 is the bridge to Xenix.' Not a lot of people know that...

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Microsoft has apparently sold its entire 12.3 percent holding in SCO. The indication on SEC Form 144 is that the sale took place around 12 January, with Goldman Sachs acting for Microsoft. Strictly speaking, the filing is an indication of a proposal to sell, and not a definitive notice. The timing of the sale is certainly interesting. Had Microsoft decided to sell its holding on 27 December, it would have done so when the share price was at a 52-week high of $35.875. But by 12 January, the price was around $25, and sank on 12 January when Goldman Sachs started selling the shares. A key point is that on 12 January SCO announced an expected shortfall in earnings because of Y2K effects, which was confirmed in the Q1 results on 18 January. Microsoft acquired the shares as a result of getting SCO, founded in 1978 by Doug and Larry Michels, to work on a version of Unix called Xenix. Microsoft had licensed Unix from AT&T, and the product was first marketed in 1979. In 1987, Microsoft was concerned that AT&T's Unix applications might not run with Xenix. As a consequence, AT&T agreed to add some Xenix code to its Unix and to pay Microsoft a royalty for this. Novell subsequently acquired Unix from AT&T, held it for two years, and then sold it to SCO in 1995 (with Novell receiving a 13.8 percent holding in SCO as part of the deal). The next year, SCO realised that the code added to Unix was no longer needed or relevant, so it asked Microsoft to agree to end the agreement. Microsoft refused, with the consequence that SCO complained to the European Commission competition directorate early in 1997. In FY 1998, SCO paid Microsoft more than $1.138 million in royalties. Four months later, the EC saw Microsoft's action as a restraint of trade, so Microsoft quietly agreed to settle the case and avoid a formal hearing. The Commission noted that SCO could "design its future products as it wishes, is not obliged to use any Microsoft intellectual property in future UNIX products". SCO said that "the lifting of this burden" would have a "positive impact". Microsoft's press release "applauded the decision of the European Commission to close the file" and failed to mention the EC ruling against Microsoft. ®

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