The long-trailed deal between Caldera Systems - the Linux part of Caldera, rather than Lineo, the separate but blood-related embedded Linux company - and SCO has happened. Caldera is acquiring SCO's Server Software and Professional Services divisions, leaving SCO with Tarantella and the revenue stream from SCO OpenServer.
Caldera was only interested in the compatible SCO business, so SCO is now able to continue its strong competition with Citrix, for whom the deal must be very bad news.
The rationale for the deal is that Caldera will be the first Open Internet Platform that combines Linux and Unix. Caldera will now get access to 15,000 partners worldwide, although it has to be admitted that they can'tbe very active, in view of SCO's hard times. But perhaps this deal will invigorate some of them.
SCO will get 28 per cent of Caldera Systems' shares (17.54 million, with 2 million reserved for employee options), plus $7 million in cash. In addition Ray Noorda's Canopy Group, which staked Caldera, has agreed to loan $18 million to SCO.
SCO OpenServer revenue was $11.1 million in Q3, and SCO will get around 55 per cent of future OpenServer revenue.
Ransom Love, CEO of Caldera Systems, will become CEO of a new Caldera Inc, which became a shell company after Caldera won its antitrust case against Microsoft. SCO president David McCrabb will become president of Caldera Inc. Bryan Sparks will remain with Lineo, which has filed for IPO.
The deal is interesting because of the complex and somewhat incestuous relationship between Caldera, SCO, Microsoft, Citrix, and Novell. Microsoft acquired SCO shares as a result of getting SCO, founded in 1978 by Doug and Larry Michels, to produce 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.
Ray Noorda subsequently acquired Unix from AT&T for Novell, held it for two years, and then it was sold to SCO in 1995 - with Novell receiving a 13.8 per cent 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. In January, Microsoft sold its entire 12.3 per cent holding in SCO, and the SCO share price began to collapse.
Caldera Systems received a $30 million investment from Sun, SCO, Citrix, Novell and venture capitalists before the IPO, and this was then converted to shares that are locked until mid-September. The Citrix investment in SCO was linked to the company's desire to encourage access to any application on any platform with any device.
The market hasn't paid much attention to the deal so far, with SCO shares marginally up and Caldera's marginally down, on low volume. For Caldera, this deal could add some shine to its image, but it is a deal for the long term rather than the immediate future. It does improve Caldera's positioning in the SME business Linux and Unix market. ®