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SCO admits: Linux jihad is destroying our business

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By law, companies must provide apocalyptic forward-looking scenarios in their SEC filings. They need to show they've thought of everything, to fend off potential class action suits just in case the sky really does fall in.

But in a filing yesterday the SCO Group gave a strong hint that while it anticipates riches from IP licenses, its current business is falling apart. Deeply embedded in the risks portion of the filing is this statement:

"We are informed that participants in the Linux industry have attempted to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services that they purchase. They have been somewhat successful in those efforts and similar efforts and success will likely continue. There is also a risk that the assertion of our intellectual property rights will be negatively viewed by participants in our marketplace and we may lose support from such participants. Any of the foregoing could adversely affect our position in the marketplace and our results of operations. "

Which boils down to two admissions. SCO has already lost business from its loyal customer base. And it expects to lose more.

Much of SCO's channel remained loyal to the business through thick and thin: although it's hard to imagine now, the Michels' was a socially conscious company. SCO was a channel player and retained good relations with OEMs ranging from DG to IBM. SCO's customers in retail and distribution fended off the great Windows assault of the mid-90s and the ancient OpenServer terminals you could see in almost every retail store on a British high street were not going to be surrendered lightly. But patience has at last worn thin. Where Microsoft's slick marketing failed, SCO's own jihad against Linux has succeeded: in scouring its customer's loyalty.

Doug Michels was never quite comfortable with the idea of Linux, blasting "punk young kids" (from Norway), and Caldera's Ransom Love - who has now departed and disowned the inheritors' current strategy - was never completely comfortable with the GPL. But Ransom's strategy of working with the channel, trusting them enough to migrate to Linux at their own pace, certainly looks a wise strategy now. (Certainly wiser than we thought at the time.)

SCO has a conference call with showman lawyer David Boies later this morning, Pacific Time. Boies is working for his supper, and there's some interesting speculation at Groklaw as to whether the latest batch of equity financing matches the near-$9 million the SCO Group will have burned through in legal fees.

And the million dollar legal team have filed another motion blocking Red Hat from calling its bluff. We don't want to read too much into the fact that the usually very forthcoming SCO folks declined to answer our questions today, but pointed us to the conference call. ®

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