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Caldera The Almighty Buck

Baystar Confirms Microsoft Behind SCO Investment 468

Bruce Perens writes "Business Week has confirmed that Microsoft arranged the Baystar investment in SCO. A managing partner of Baystar says the call wasn't from Gates or Ballmer. But it wouldn't have to be, would it? Obviously, there's more investigation to do." Reader skreuzer writes "Yahoo Finance is reporting that SCO announced that the company's board of directors has authorized management, in its discretion, to purchase up to 1.5 million shares of SCO's common stock over the next 24 months. SCO has approximately 14.4 million shares of common stock issued and outstanding. Any repurchased shares will be held as treasury stock and will be available for general corporate purposes." Newsforge (which is also part of OSDN) is also following the story.
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Baystar Confirms Microsoft Behind SCO Investment

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  • by Lord Grey ( 463613 ) * on Thursday March 11, 2004 @11:55AM (#8532076)
    Well, this certainly flies in the face of at least one previous report [eweek.com], doesn't it? From that linked article:
    Blake Stowell, SCO's director of communications, acknowledged that the leaked memo is real.

    But, Stowell claimed, pundits had mischaracterized the memo's context. "We believe the e-mail was simply a misunderstanding of the facts by an outside consultant who was working on a specific unrelated project to the BayStar transaction and he was told at the time of his misunderstanding. Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction."

    Responding to the allegations, a Microsoft spokesman said: "The allegations in the posting are not accurate. Microsoft has purchased a license to SCO's intellectual property, to ensure interoperability and legal indemnification for our customers. The details of this agreement have been widely reported and this is the only financial relationship Microsoft has with SCO. In addition, Microsoft has no direct or indirect financial relationship with BayStar."

    (Emphasis mine.)

    Golly gee, I wonder what they're trying to hide? Anyone?

  • by BigFire ( 13822 ) on Thursday March 11, 2004 @12:03PM (#8532173)

    This is nothing new, odd, illegal, unethical or strange either. It is a common business practice of publicly traded firms

    Not when they're a couple of quarters away from insolvency. Stock buyback usually occurs when a company with low stock price have too much money on hand and no viable avanue of investement available.

    SCO qualified 2 out of 3 catagory, but they most definately do not have too much cash on hand.
  • About stock. (Score:5, Informative)

    by mindstrm ( 20013 ) on Thursday March 11, 2004 @12:05PM (#8532203)
    There is a common misconception out there that stock price directly affects a company... it does not.

    If I purchase a milliion shares of SCO on the open market, SCO does not see a PENNY of that money. The only time SCO sees money from the sale of stock is when SCO issues NEW stock into the market.

    So.. if the stock price goes up, it's good for a company, in that they can issue more stock, and get more capital without giving away such a large piece of the pie.

    However, microsoft buying a million shares of SCO would not by itself fund sco at all.... unless they bought those shares FROM SCO, which it doesn't sound like they are doing.

  • by falonaj ( 615782 ) on Thursday March 11, 2004 @12:08PM (#8532236) Homepage
    Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction.

    Well, if a Microsoft representative called Baystar from his private phone during a holiday, then it was technically not Microsoft who orchestated this.

    I wonder if Microsoft could be sued at all for unfair competition if Bill Gates chose to openly fund SCO shares from his private money?

  • by Anonymous Coward on Thursday March 11, 2004 @12:09PM (#8532246)
    Here's what's so extra sleazy about this: when iI worked at microsoft, "we" (not me) stole intellectual property from apple, outright theft of technical documents.

    So, Microsoft doesn't harbor some deep respect for intellectual property, nor does it have any geek-to-geek respect for a fellow hacker like Linux. It's all about sleaze, sleaze, sleaze.

  • by mefus ( 34481 ) on Thursday March 11, 2004 @12:12PM (#8532276) Journal
    Someone on groklaw.net the other day suggested they might do something like this in the very near future, as they were nearing the "support" point in their continuing stock decline.
  • by Danse ( 1026 ) on Thursday March 11, 2004 @12:14PM (#8532302)

    It wouldn't matter who made the call or when, as long as the money came from Microsoft. If it came directly from BillG himself, then it still wouldn't matter would it? He's the head cheese of Microsoft, and his money comes from Microsoft too, doesn't it?

  • Re:About stock. (Score:5, Informative)

    by Fnkmaster ( 89084 ) on Thursday March 11, 2004 @12:15PM (#8532328)
    Baystar did a PIPE deal with SCO. See here [businessfinance.com] for an explanation of PIPEs. This is when a private equity firm infuses capital to a publicly traded company by acquiring newly issued securities directly from the company at a discount to the current market price - not buying them on the open market. So the Baystar deal DID infuse money directly to SCO, though you're correct that the market price and open market transactions don't directly affect day to day operations of the company and don't directly feed cash into the company's coffers.


    Of course, a good market price makes it much easier to raise more money in a follow-on public offering, PIPE or other kinds of transactions.

  • Re:About stock. (Score:5, Informative)

    by gfxguy ( 98788 ) on Thursday March 11, 2004 @12:17PM (#8532354)
    That's somewhat misleading...

    If the company is holding 50% of it's stock in reserves, and the stock price doubles because there is a perception that the stock is desirable, they've just doubled the value of their reserves.

    Moreover, all the executives who own stock in the company have more reason to keep up the fight, because they will personally gain.
  • by Anonymous Coward on Thursday March 11, 2004 @12:20PM (#8532396)
    A) Not true.
    B) Even if it were (which it's not), Paul Allen has bugger all to do with Microsoft these days.
  • Re:About stock. (Score:1, Informative)

    by Mateito ( 746185 ) on Thursday March 11, 2004 @12:23PM (#8532427) Homepage
    > If I purchase a milliion shares of SCO on the
    > open market, SCO does not see a PENNY of that
    > money.

    1) It is possible for a company to invest in its own stock, though there are rules and regulations over this. This is different from a Buy Back where the stock is effectively taken off the market.

    2) Although SCO as a corperate entity might not see a dime, plenty of individuals will. This may be as options, as stock bought at as discount though an employee purchase plan, as stock granted as "prizes" or simply because there is some bonus in the contract tied into the stock price.

    Originally, the stock price was an indicator of the market value of a company in the future. Company X is worth Y millions and has Z millions of shares in market, their shares are worth Y/Z. If you believe that in the future the company will be worth Y+dY Millions, then buying the shares for less than (Y+dy)/Z means that you will be making a profit.

    Of course, now its all speculation for the majority of non-blue chip companies, the stock price exists in some parallel universe. The SCO stock price rollercoaster has been a perfect example of this.

    3) PHBs, being PHBs, regard stock price as a measure of confidence. For example, I have heard people saying that one should avoid Sun servers as Sun's stockprice is low. Its the herd mentality. Stupid... and it seems that these people still haven't learnt anything despite the .com bust, despite 1987 and despite that they are going to do it all again some time in the next 20 years.

    IANAPHBY.

    (Y = Yet)

    Matt
  • by Anonymous Coward on Thursday March 11, 2004 @12:25PM (#8532450)
    Do they say 'Scoe' or 'Ess See Oh'?
  • by mefus ( 34481 ) on Thursday March 11, 2004 @12:25PM (#8532453) Journal
    buy hot coffee at McDonald's

    I think you are misinformed about that lawsuit.

    McDonald's knew people were burning themselves, and they continued to heat their coffee to extremes just short of boiling.

    They provided a "to go" cup that would collapse from the pressure if you tried to lift the cup full of coffee with your hand.

    To mitigate that they provided an equally flimsy lid that would support the shape of the cup.

    It was the kind of lid where you peel some of it back to be able to sip the coffee.

    The woman that was burned did this while seated in her automobile. The lid collapsed and fell off the cup when she peeled it back. Then the cup collapsed in her hand. Then the near boiling coffee spilled out onto her lap, and gave her second degree burns on her labia and genital area.

    The executives at McDonalds knew this was happening and didn't change their policies on the serving of coffee.
  • by isn't my name ( 514234 ) <.moc.htroneerht. .ta. .hsals.> on Thursday March 11, 2004 @12:38PM (#8532622)
    According to the Newsforge article, Baystar specifically confirms that Vulcan does not invest in Baystar.

    Of course, the same article indicates that Baystar refuses to staight that there are some MS or MS people investing in BayStar.
  • by goombah99 ( 560566 ) on Thursday March 11, 2004 @12:43PM (#8532682)
    The above poster is totally correct. Here is a link to the PDF file [baystarcapital.com] from Baystar's own website. On page 3 of this there is a chart showing the top ten investors in Baystar. Number one on this chart is Vulcan Ventures which has 1.8 billion dollars invested in Baystar!!!!
  • by Saeed al-Sahaf ( 665390 ) on Thursday March 11, 2004 @01:26PM (#8533173) Homepage
    Well, if a Microsoft representative called Baystar from his private phone during a holiday, then it was technically not Microsoft who orchestated this.

    Nonsense. If a Microsoft representative calls up SCO on Christmas eve from pup someplace in Christchurch while wearing a pink tutu, and that person has their cell phone signal bounced off of the solar reflectors on the Mars rover, relayed through several satellites and sketchy third world telephone exchanges, bounced through sever P2P nodes and then piped into the PBX of the Mormon church, if that person is representing the interest of Microsoft at the request of superiors, then yes, technically Microsoft "orchestrated this."

  • by youngsd ( 39343 ) on Thursday March 11, 2004 @01:34PM (#8533293)

    If you actually read the PDF, you will see that you (and Wired, for that matter) are jumping to conclusions. The chart showing Vulcan Ventures (and Microsoft, for that matter) is a chart of data from PlacementTracker showing the overall number of PIPE deals. The vast majority of which have nothing to do with Baystar. This paper is Baystar's way of convincing people that PIPE transactions are a good thing.

    None of which is to say that Vulcan and/or Microsoft don't invest through Baystar -- just that this PDF says nothing about it.

    -Steve

  • Here's the confusion (Score:5, Informative)

    by GreenCrackBaby ( 203293 ) on Thursday March 11, 2004 @02:12PM (#8533762) Homepage
    Baystar's #1 largest investor, Vulcan Ventures is, for all intents and purposes, Paul G. Allen, Microsoft Co-Founder and major MSFT stockholder.


    Baystar's #9 largest investor is Microsoft itself.

    Where is the confusion?


    Here's the confusion:

    'A Microsoft spokesman says that the company has no "direct or indirect" financial relations with BayStar'
  • by FatAssBastard ( 530195 ) <fatassbastard@noSpAM.email.com> on Thursday March 11, 2004 @02:55PM (#8534219) Homepage
    Here [etrade.com] is a chart of SCOX stock over the last 3 months. This makes me very happy, how 'bout you? :)

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