SCO - What have WE Forgotten?

Ed Almos asks: "When trying to examine the SCO affair with a cold analytical eye I can't help but be worried. Over the last twelve months the SCO stock price has climbed from just over a dollar to nearly eighteen dollars and at its peak it was well over twenty dollars. Hindsight is a wonderful thing and if I had invested my life savings in SCO stock last Christmas I would now be a multi-millionaire, examining which speedboat to buy instead of which bills to pay. Even a six month analysis of the stock price shows steady growth from about ten dollars to seventeen, a strange situation for a company which is supposed to be on its last legs. For years I had a friend who worked in the petroleum industry as a deep sea diver. Deep sea diving is one of the most dangerous jobs on the planet and when you looked at Matt's desk the first thing you saw was a wooden sign asking 'what have I forgotten?' When you are three hundred feet down the last thing you want is to find out you have forgotten an important tool, it's bad news all round. Matt lived to a ripe old age so I suspect that the sign worked. We all need to ask the same question about the SCO affair, what have we forgotten?"

"Over the last eight months I have read countless posts on Slashdot regarding SCO and most if not all of the posts view the scene with rose-tinted spectacles. Promises are made that SCO will be buried and that McBride will find himself in prison, yet they are still there and McBride is still in charge. The men and women who play the stock market on a regular basis are no fools and something unknown to Slashdot readers made the SCO stock price rise by 2.4%, on December 26th, over half a days trading. If someone buys a stock they expect the price to rise, so what have WE forgotten that could be good news for SCO investors? The principle of 'many eyes' has been used by the Open Source movement before. Thousands of people examine source code, submit patches, and ensure that we give the best software we can to the community at large. Bugs are announced and fixed within hours and all of us know that this methodology provides a better solution than that offered by closed source products. We now need to apply the same methodology to the SCO problem, all of us need to consider what we know about this sorry affair and how we can legally contribute to the downfall of the SCO Group.

SCO have been ordered to produce their evidence against IBM by midnight on January 11th, 2004. This gives us [five days] to make sure that when the IBM lawyer marches into court he has a spring in his step, knowing that he has every Linux user on the planet behind him. THEN we can talk about SCO being buried, but not before.

Thank you for your time and a Happy New Year."

This is nothing new

It's easy to find things to kick yourself about. If you look at the last year -- or any year -- you can probably find 10 investments that would have made you really wealthy if only you'd known about them ahead of time, all of them shady or of questionable long-term value. That this particular one happens to be in a field that you care about just means you notice it, not that it's unusual.

Trouble is, you can also find 100 investments that looked just like the great bargain-basement opportunities, but went from low-valued to zero-valued during the same year. Nobody knows for sure which ones are which until after the fact. Some people are better at guessing than others; those people go on to be successful mutual fund managers, but even the successful ones get it wrong a lot of the time. They keep making money because they have their funds spread out over a lot of stocks, not because they have crystal balls in their closets.

Here's an interesting fact: Very few stock funds, even the successful ones, outperform market indexes over the long term. Lots of high-profile funds do really well for a year or five but then have a lousy year or two and lose all their gains relative to the market as a whole.

If you want to build wealth trading stock in public companies, history says the most successful strategy is to buy a wide, diverse portfolio. Keep buying into it over time, whether the market is up or down ("dollar cost averaging.") Then ignore the people who happen to get lucky on a particular stock pick -- because you know if you try to do that, you're much more likely to end up broke than rich.

Re:This is nothing new

The question is; do you want to feel good about yourself or worship at the alter of Mammon. If the soul purpose of ones life is to die with as much money as possible then perhaps one may regret not buying SCO stock. But consider all the honest companies that may be lacking investment due to this anomaly.

Re:This is nothing new

> The question is; do you want to feel good about yourself or worship at the alter of Mammon. If the soul purpose of ones life is to die with as much money as possible then perhaps one may regret not buying SCO stock. But consider all the honest companies that may be lacking investment due to this anomaly.

(You don't have make it your sole purpose in life, but could you at least sacrifice a rubber chicken upon the altar of literacy?)

Spelling flame aside, I pay frequent homage and occasional tribute to Mammon. He's a lesser god, but his temple is always a hive of excitement. And it's from that perspective that I'm speaking.

I don't regret not buying SCO. The investment premise is that there's a one-in-ten chance that they'll be able to slip this scam past a judge, and sock IBM to the tune of ONE... BILLION... DOLLARS. (Or that IBM will simply buy the entire company for $500M to prevent the scam from working.)

That's it. If you buy SCOX, you're buying a lottery ticket. A hedge against fraud and stupidity, as it were -- if these dirtballs manage to make their scam work, it's the end of Linux and a very bad omen for the rest of the technology industry. If you're heavily invested in RHAT and NOVL, for instance, you might want to own some SCOX on the off chance that the judge falls for the scam and lets Darl wipe Linux off the face of the earth.

Had SCOX been optionable, I'd have bought put options, several months ago, and every one of those options would have expired worthless, because the scam has lasted a lot longer than I thought it would. But of course, going net short SCOX is just as much a speculation on a judge's ruling as going long SCOX.

The reason I didn't buy or attempt to short SCOX has nothing to do with a hedge against stupidity or speculating that the scam will eventually be unwound and Darl will finally get his much-deserved perp walk.

It's because I don't play the lottery. Either way. There are good and bad companies out there that are undervalued. Buy those. There are good and crappy companies out there that are wildly overvalued. Don't buy those.

SCOX is a crappy company for which there's no way to know whether it's undervalued or overvalued. The risk of going long or short do not justify the rewards.

My position on the behavior of The SCO Group is that they're a bunch of lying fuckweasels who deserve nothing less than a forcible sodomization with a diamond-grit-encrusted Louisville Slugger wielded by SEC Chairman Bill Donaldson himself. But so long as the stock's valuation is dependent upon the presence or absence of Clue Receptors in the neural pathways of a single human being, I have (and will take) no position in SCOX stock.

Re:This is nothing new

My position on the behavior of The SCO Group is that they're a bunch of lying fuckweasels who deserve nothing less than a forcible sodomization with a diamond-grit-encrusted Louisville Slugger wielded by SEC Chairman Bill Donaldson himself.

You are being a little vague, could you draw me a picture?

Dream Mine

I think the article is indicating that the stock price hints that there might be more behind the company than what we see in the anti-SCO press. The stock is rising. Is there something that the anti-SCO press is missing about the company? or is it a suckers' bubble?

I tend to take any stock that comes from Provo with a grain of salt. Provo is the MLM capital of the world. Here is another Utah Valley company: The Dream Mine [reliefmine.com] was revealed to a prophet about a hundred years. It is not a traditional mine. The mine actually leads to the hidden vault of treasures buried by the Nephites. FYI, the Nephites were from a lost tribes of Isreal that came to America on a submarine a few thousand years ago. They got all the best treasures. But the Lamanites (American Indians) were horrible sinful creatures. They killed all the Nephites. The Nephites buried all of their treasures before the final battle.

The trick to the mine is that the secret entrance will not be revealed until God is getting ready to smite the gentiles.

This investment is great if you wish to hedge against Armagedden, and the stock tends to do quite well, despite the fact that it won't have a product until the end of the world.

Unfortunately, you have to be of the faith to own stock.

SCO is likely just another dream mine. As mentioned early, the faithful have a long history of falling for every MLM and get rich quick scheme you can name. They often get burned. Of course, if the case comes before a jury of the faithful, SCO will win big time, regardless of the merits of their case.

The Utah Court system is SCO's ace in the hole. If the jury thinks that ruling in favor SCO would make Utah Valley the new Bellevue, then they might rule for SCO. Regardless, I would be worried about shorting SCO or any penny stock from Utah, as Provo Stocks have certain irrational characteristics.

Re:Dream Mine

I think the article is indicating that the stock price hints that there might be more behind the company than what we see in the anti-SCO press. The stock is rising. Is there something that the anti-SCO press is missing about the company? or is it a suckers' bubble?

It's a sucker's bubble. Basically, what the anti-SCO press is missing can be found at GrokLaw.

You have to understand something very simple:

1. There are very few people in SCO's pool of stock compared to other small cap investments.

2. A majority of that stock is held by institutions and these institutions are known for quasi-legal and illegal practices - just like Canopy.

3. Because of 1 & 2, the ability to control the price of the stock is greatly enhanced, and so long as Baystar, RBC, Renaissance Capital and others feel the need keep the price up, no amount of shorts will affect it for very long. There will not be enough shares out there to make it happen - they've seen to that.

I tend to take any stock that comes from Provo with a grain of salt. Provo is the MLM capital of the world. Here is another Utah Valley company: The Dream Mine was revealed to a prophet about a hundred years. It is not a traditional mine. The mine actually leads to the hidden vault of treasures buried by the Nephites. FYI, the Nephites were from a lost tribes of Isreal that came to America on a submarine a few thousand years ago. They got all the best treasures. But the Lamanites (American Indians) were horrible sinful creatures. They killed all the Nephites. The Nephites buried all of their treasures before the final battle.

The trick to the mine is that the secret entrance will not be revealed until God is getting ready to smite the gentiles.

Well, you are half-way correct about the Dream Mine, but we'll save that for another conversation because the topic itself leads people to think you've lost your marbles using this as an example.

Utah Valley Mormons have got to be some of the most gullible people I have ever met. Faith has nothing to do with it. It's the wide-eyed ignorant bliss that comes from ignoring the rest of the world in the hopes that it will go away.

This leaves sharks like McBride (who was a putz back at BYU when I was there) to prey on the "innocent" using the Church and the Utah culture as a backdrop to Rape, Pillage, and Burn his way through everyone's money. In Wall Street circles, that's know as Standard Operating Procedure. And for that you get bonuses, accolades and a chance to do it again.

I think the word you are looking for here is Gaddianton.

Nitpicks

FYI, the Nephites were from a lost tribes of Isreal that came to America on a submarine a few thousand years ago.

The submariners were Jaredites, who supposedly came straight from the Tower of Babel. Nephi and friends just had an unremarkable ship. Also, in the traditional interpretation the Lamanite ancestors all came on Nephi's ship; it wasn't until people examined Native American DNA that the idea of unmentioned Siberian-descended Lamanite groups became popular.

The Utah Court system is SCO's ace in the hole.

Not yet, it isn't. Judge Wells certainly doesn't seem to have a pro-SCO prejudice, and at the rate the McBrides are going the case may never make it to a jury trial. Even if it gets that far and SCO's lawyers somehow manage to get a biased jury, Novell has as much of a "hometown Utah company" appearance as SCO does, and based on their statements and copyright filings Novell looks like they're going to bat for our side.

Regardless, I would be worried about shorting SCO or any penny stock from Utah, as Provo Stocks have certain irrational characteristics.

I'd be worried about shorting SCO because every stock (especially every thinly traded stock) has certain irrational characteristics. If there are suckers out there who will pay $20 a share for SCO, how do I know there aren't suckers who would pay $40 a share?

Re:This is nothing new

I think what the author was trying to say is "What do they [SCO Investors] know that we don't?". I agree that the case SCO is making is rediculous, and frankly, I think they'll lose. The question, though, is there something that they could/would/can pull in court, that would make them money? As we all know, just because everyone knows your wrong, doesn't mean the court will agree with you.

Re:It's not what WE missed...

Actually, we do.
I work for an investment bank and IB analysts pull information from EVERY source. What technologists often miss, is that we look at it from a different perspective. Professionals don't care how cool a technology is or how miserable SCO's actions are, they care about the changes in future revenue this could cause, how far that revenue is in the future, the risk associated with achieving that financial goal and the different profit scenarios associated with each level of risk.

SCO might be a bubble, but with the attention it draws, it also has a very solid chance of not being a bubble. The larger investors will be watching this stock VERY closely and would dump it way before you have any idea that SCO is going down. One aspect in their favor for you to consider is that of all of the posts here I don't see anyone giving this argument any credit at all. That's the most dangerous sign I've seen yet and I hate SCO as much as anyone here, but I'm not blind either.

SCO could win this in several ways and no, it doesn't have to be inbred juries. The GPL has never been tested in court, I haven't seen anything indicating that this is 100% reliable. Losing that would be huge and the impact on the open source movement would be tremendous. SCO also might actually have a 'silver bullet' of stolen or misappropriated Unix code. There are good reasons why they wouldn't release this code. If they did, the Linux community would make sure that the offending code wasn't in the next kernal release (which would probably be all of a week in coming) and then SCO could only go after users for past use of their code. That wouldn't generate anywhere near the revenue that they will if they can catch the Linux community cold and then force you to pay them or abandon your IT infrastructure until a patch comes out. That's much more enforcable as well.

In fact, SCO's 'public letters' could all be a smoke and mirrors game, and the code they've released so far to endless ridicule here on /. could be a ruse to make the linux community overconfident and not look as closely as they should.

The author of this original thread had an excellent point - sure it's easy to dismiss them as non-technical people who read 'serious' magazines. But you're missing the point, you're talking about people who have made a LOT OF MONEY investing in companies, it's what they do. If SCO was just smoke and mirrors don't you think some analysts would be crying that? Surely at least one arbitrage firm would be setting up a short position (and yes you can do short positions while mitigating your upside risk). But I don't see any of that - before you accuse the 'other side' of reading misleading press check your own.

Now, you may be right, SCO might be full of it, but after seeing all the posts on this article and not seeing any actually talk about places where SCO might actually have a good point, I'm actually worried now that they might have a much stronger position than I had ever thought. Before this, I didn't really follow SCO, but now I'm very concerned.

The science behind finance and pricing and valuation at the large IB's is just as valid as any amount of technical knowledge you have, just in a different area. And I imagine people have been all over SCO's future and the potential embedded profit scenarios in their legal action and that's reflected in their current price. SCO isn't in the same situation as the internet bubbles, people have seen these types of lawsuits before, they know how to value them, this is not new. This concerns me.

I still can't bring myself to buy stock in SCO, but I'm very concerned know that they might actually have something.

Re:It's not what WE missed...

I work for an investment bank and IB analysts pull information from EVERY source.

That may or may not be so. Analysts also sometimes lie, as the New York Attorney General recently demonstrated in a successful court case. I won't speculate on whether it's more of a case of ignorance, lying, or a cynical evaluation of the ignorance of the market on the part of certain investors, that has been driving up the price in this case.

SCO might be a bubble, but with the attention it draws, it also has a very solid chance of not being a bubble.

Let's apply Occam's Razor here: I move that they are getting lots of attention because (a) they are sqwarking a lot; (b) they are scaring some Fortune 500 companies, at least temporarily until the CxOs talk to their legal advisors; (c) there is a lot of money and a catastophic harm to the Linux market puportedly at stake here, if you believe SCO.

Attention does not imply correctness. Popularity does not imply correctness.

The GPL has never been tested in court, I haven't seen anything indicating that this is 100% reliable.

Well, admittedly there is a flaky argument prevalent on Slashdot and Groklaw. The arguments runs that if the GPL were "invalidated" it would revert to "no rights to copy", which would kill SCO in punitive damages. Not necessarily. Another possibility is that the court might try to find the "nearest charitable purpose" that is similar to the spirit of the GPL but doesn't break the law.

So that counter-argument doesn't really work. But the problem with your argument is more fundamental. In order to talk about this sensibly we have to speculate on what precisely the judge might try to strike down. No-one, to my knowledge, has put forward a good argument for why any law or constitutional amendment would invalidate any aspect of the GPL - least of all SCO.

Granted, the least popular aspect of the GPL is the copyleft idea. But it is a completely logical fallacy to argue that because it is unpopular with some, then it is somehow legally dubious. Yes, it is perhaps the most likely aspect for SCO to attack. But without a visible chink in the armour, why should we worry?

I think the onus is on you to suggest an actual argument for why the GPL might fail in court.

There are good reasons why they wouldn't release this code. If they did, the Linux community would make sure that the offending code wasn't in the next kernal release (which would probably be all of a week in coming) and then SCO could only go after users for past use of their code. That wouldn't generate anywhere near the revenue that they will if they can catch the Linux community cold and then force you to pay them or abandon your IT infrastructure until a patch comes out. That's much more enforcable as well.

Note that SCO (both predecessors in interest, old SCO and Caldera) has contributed to Linux massively, and even sold it, and continued to offer it for months after evidence of infringement was allegedly discovered. So what we have here is a company spending years giving out its own product for free and misleadingly giving the impression - in a very clear license, the GPL! - that the product being given out is unencumbered in all relevant respects. Even if SCO could persuade a judge that the infringements were not noticed due to gross incompetence on SCO's part, any reasonable judge would give all parties a reasonable grace period to wait for the patch to come out and apply it.

And the law (and IBM's contract with SCO, incidentally) obliges SCO to reveal what code is infringing before it can claim damages. Damages incurred by users prior to that time are innocent infringements, and although they may be technically liable, would any judge in the land award SCO money based on its own failure to mitigate the alleged damages? No, it would not. There is no successful precedent that I have heard of for such abusive rent-seeking towards innocent third-

Have we been trolled?

Ok, I am assuming that you are trying to indicate whay institutional bankers are still investing in SCO, just as Bank of America, et al. were doing with Parmalat up until very recently. But this viewpoint overlooks a large number of issues that I don't see an institutional banker with ANY legal screening missing (you do legal screening of these claims, right?). OK, even without legal screening, some analysts have been saying some interesting things about SCO. IANAL, however, though I read court cases as a hobby.

The first is that the GPL being tested in court doesn't do a darn thing for SCO. Either they lose (and probably go out of business), or they win and face massive lawsuits by Linux kernel developers over copyright infringement. Yes, without the permission from the GPL, it is SCO who is infringing on copyrights not only by IBM and Red Hat, but also Linus Torvalds and THOUSANDS of other contributors.

Secondly, analyists HAVE been saying that these lawsuits undermine SCO's former core competency as a software manufacturer.

Laura DiDio aside, I think analyst reaction to SCOG has NOT been as positive as you make it out to be. And Laura DiDio has claimed that the lack of indemnification is what holds Linux up in the enterprise while failing to mention that no other enterprise OS offers such indemnification. Interestingly Linux as offered by HP now does which should by that measure give them a strong advantage in the marketplace.

Third, SCO did not fare well in the last round of hearings. I have generally used pretrial hearings as a general test of how the judge views issues at hand, and the judge has not reacted well to what IBM has argued are sets of delaying tactics and discovery requests without specific allegations of wrongdoing (i.e. fishing for evidence). SCO will have had 7 months to prepare their response to the discovery request in January, and it will be interesting to see what they do or don't put forth.

Finally, the fact that SCOG was an active contributor and distributor (even after the lawsuit was filed!), they cannot argue that they inadvertantly distributed their trade secrets under the GPL. No one believes that.

SCO IS A BUBBLE. And the SEC is now investigating three banks in conjunction with their handling of Parmalat (including Deutchebank and Bank of America). SCO may be next.

You miss the point.

Are all our ducks in a row?

I think the core of the question is not stock value, but is there something about the overall situation that we are missing. Is there something that we are overlooking that might lead to a "gotcha" by McBride and crew that we can prevent now.

That is a question well worth pondering.

Application Binary Interfaces

Well, we have spent a lot of effort in debunking the supposed SCO claim's of ownership of those header files; but what if that's just a red herring? What if they are not claiming ownership of them, as Linus presumed in his rebuttal, but rather, know that there is some kernel code behind those interfaces that was copied from SCO code? The relevent portions of the SCO claims are as follows:

You are not running Linux binary code that was compiled from any version of Linux that contains our copyrighted application binary interface code ("ABI Code") specifically identified in the attached notification letter.

See? They're not explicitly claiming ownership of the data in those header files, but rather they are claiming that applications which use them are violating their copyright restrictions. Could this be a duck that is not in line? Could there be code behind some API call in those header files that SCO can prove clear ownership of?

Re:did you even read the article

You have got to be kidding me.. Look how high the price of stock in .com buisnesses a few years ago.. how long did they last? or how about worldcom's stock? or Enron's?

Investors have a tendancy to fall for hype.

What have we forgotten? How about the fact that SCO releasing EVERYTHING they say on prnewswire where the investors get to see them.

Re:did you even read the article

The article is predicated on the assumption that the stock price means something about the fundementals of the company. I'd say a comment on the realities of speculative investing is on-topic.

Re:did you even read the article

The author was just using SCOs stock as an indicator that the company is not going to lose the court case like everyone else assumes will happen.

My opinion: If that's the case, the author is an idiot. This whole situation shows the signs of a textbook pump-and-dump manuever. The fact that Linux was chosen as a bogus legal target is fairly irrelevant other than the fact that MS may have been involved with encouraging that decision. IBM is far larger and more powerful than both SCO and Microsoft put together. If they thought they stood a chance of losing, they would have just bought SCO outright.

My prediction: In the end, this whole thing will backfire on the evil men who started this mess. Linux will be championed not only as a victor, but as an unstoppable force. SCO will wither and die for lack of a workable business model. MS will continue to lose the PR war against OSS.

Sidenote: It is not ethical to invest in an unethical company just because their sleazy tactics are causing a temporary stock rise.

Re:IBM is bigger than Microsoft

Who's bigger: IBM (according to finance.yahoo.com)

IBM: 315,899 employees

revenue: 81.19 Billion
revenue/share:49.607

Microsoft: 55,000 employees
revenue: 32.19 Billion
revenue per share: 3.03

In terms of employees, IBM is 6x bigger than Microsoft.

In terms of revenue, IBM is almost 3x bigger than Microsoft.

In terms of revenue per share, IBM is almost 15x bigger than Microsoft.

IBM is the worlds' largest software company, not Microsoft. It's just that IBM bundles their software w. services and hardware.

Re:did you even read the article

It will not backfire on the evil men who started this mess, it will backfire on the idiots who have their (or their clients') money 'invested' in that company when the music stops.

I invest in shares on a fairly minor basis and was so appalled by the boom of the late 90's (Warren Buffett: 'how are these companies ever going to make money?') that I got out altogether for a while. I missed some massive profits - as we probably all have here - but totally missed the subsequent crash as well. I finally started coming back in at the end of 2001.

The problem back then was that shares were vastly overvalued but kept on rising because they were rising. The charts looked great and pension-funds managers who pulled their funds out of these overvalued stocks were sacked shortly afterwards because their funds were underperforming.

Then came the crash and we all got burnt. That is even forgetting companies like Enron or Worldcom.
It even looks to me as though SCO have learnt from those two companies. They are filing their correct figures and their broken business-plan with the SEC. No fraud there. People who invest there will deserve all they get, the only question is the timescale.

Expected value

OK, let's calculate out the odds that the market is giving SCO then... The $3 billion from IBM would be a one time deal, and so would just go towards SCO's book value and not their recurring revenue, so let's ignore the $3B for a moment. Stocks are trading at around a price to earnings ratio of 20 now, so multiply SCO's current market cap by 20 and we should get the expected value of SCO's earnings. Their present market cap is $251M which means their expected yearly earnings would be $12.5M. At $699 per license, that means they are expected to sell 18,000 licenses per year. The Linux Counter websites estimates that there are 18 million Linux users. Let's say for simplicity that each Linux user purchases a new computer and needs a new SCO license every 5 years. That would result in 3.6 million licenses needed per year. So the market is giving SCO a probability of 0.005 of capturing the Linux market as it claims it will do.

Let's take a different approach and assume that if SCO wins its case, everybody will stop using Linux. At that point, SCO will be worth its cash on hand. Ignoring whatever it needs to shell out to lawyers and Satan, $3B in cash would give a $3B book value and a $3B market cap since they would have no revenue. In that case, their current market cap is 1/12 of that, so the market is giving them a 1/12 chance of winning. That's a lot better than the 0.005 probability, but I still feel much better being on the 11/12 side.

Disclaimer: this are back-of-the envelope calculations. Please do your own math before drawing any conclusions and please share the results here.

Re:Expected value

This is a little silly since there is no way on this planet 18m people would pay $699 a license to use Linux. They'd switch to FreeBSD instead, or to a version of Linux with the tainted code removed.

SCO knows it won't get revenues from anyone other than Fortune 1000 corporations. They say explicitly in their FAQs that home users are not going to be asked to pay. Someone on Slashdot actually tried to buy a license, with the comic result that SCO admits the licenses are not being sold to the public at large.

If each Fortune 1000 corporation has 100 Linux systems scattered to and fro, that's about $70m. Each company would be asked to cough up $69,900 each. If SCO genuinely has a case, the Fortune 1000 companies will almost certainly cough up, since $69,900 is a tiny fraction of the legal bills they would have to confront from defending a lawsuit.

$70m in revenues for SCO is going to look pretty good, even as a one-time thing. Those are the real stakes they're playing for.

Intriguingly enough, this gives them a 17% chance of winning, or about 1 in 6.

Thoughts?

D

Re:This is nothing new

As someone who has worked in the investment industry for almost 6 years, I have to agree with Koreth on this. A rise in stock price means absolutely nothing. The line traders no little or nothing about Linux, SCO or the dispute. They know what they read in the papers, what the read from Bloomberg, and what analysts say.

Recent news tells us that all of these people can and are wrong sometimes. The fines imposed on the likes of Merrill Lynch and JP Morgan should tell use wonders.

Personally, I'm waiting to see if SCO can produce anything substantial in court, which is where they will live and die with this. Here's my prediction: If SCO cannot produce any substantial evidence to their claims, the price will drop to the sub-$.25 level faster than Bill Clinton's trousers with an intern. ;-)

Right on--SCO is speculation

SCO fails the "Dad's good bet" test MISERABLY--and as such it is NOT a reliable investment (more on that below). It is of course wise to be diligent in looking for any "ace up the sleeve" that SCO may have. However it is too soon after the .com bubble for most to forget that stock price means little to nothing about how well a company operates, and even less about its future prospects.

My father is recently retired and in the past few years has invested a portion of his savings in stocks, mainly on TSX (Toronto exchange). My father and koreth (author of the parent post) are two of very few people who seem aware of the "interesting fact" regarding stock funds performance against market indeces.

In the stock market, it seems generally to be a VERY BAD IDEA to make investments based heavily on the forecasts on market conditions and the performances of key industres and so on. My dad has had the most long term success by almost completely IGNORING trends forecasts proclaimed by the "experts" and looking at a companies current and past performance vs. its stock valuation. Some criteria are:

1. REAL assets vs capitalisation - Dad never bought into the whole .com bubble because these companies had NO "STUFF" to back their huge valuations--only business plans, expenses and ad campaigns. They held no real estate, had no inventory, not even significant intellectual property (proprietary software, patents, licensing deals and so on). If a stock looks interesting, make sure it's backed by some TRUE value

2. Is the company making money. Dad looks at the whole TSE and on the first pass he drops EVERYTHING that doesn't meed a certain PE ratio as a safe investment, REGARDLESS of what headlines they are making or press releases they are making. Dad didn't get into BRE-X for a reason--they were making headlines about a big gold find but WERE MAKING NO REVENUE YET. The find turned out to be a scam and those who gambled too long lost it all.

3. Do they issue dividends...that is a bonus...and if they do re-invest the dividends they issue back into more of the same stock. You can set it up so essentially you get shares instead of cash and you can avoid brokerage fees.

Pretty simple...and you hold everything you buy until you need to cash out or a periodic review of your investments fails to pass all your criteria. DO NOT let fluctuations in stock price--up OR down--scare you into buying or selling, EXCEPT when said fluctuation causes the stock to move outside the criteria you set as a good investment bet.

Everything else is a gamble--invest your lottery ticket money in it and nothing else.

BTW SCO fails MISERABLY as a safe investment--it fails 1. as its assets are currently next to worthless in comparison to its market valuation--and the only thing that'll change that is winning the IBM case, AND commandeering BSD since Linux users would likely move en-masse to BSD should Linux become expensive and closed. Very inlikely. It fails 2 because it doesn't make NEARLY enough revenue to pass the PE ratio test. AND because if 2. it can't do 3--pay any sort of meaningful dividend.

SCO

If any organization got as much press as the SCO, regardless of whether they did anything or not, they're stock would rise in value.

Besides, the SCO might get somewhere. After all, they've got Sen. Orrin Hatch (R. Utah) looking out after them. He's got to keep his son employed somehow.

Re:SCO

The difference being Enron was in the press after the place was a blaze and smelling of gasoline. Other then a baseball field in Houston, the masses knew very little about them prior to see suits in handcuffs and giant paper shredders on the evening news.

SCO is a catch phrase outside of tech circles. I literally had to tackle my mother to prevent her from investing. She argued about them being in the press and once the lawsuit was settled the advice she was getting was they'd triple in value. After shedding some light on the grounds of the lawsuit and how I felt about the facts of the case she understood why I freaked out. But then again, just because thats how I feel doesn't mean the judge/jury won't find in their behalf.

I'm not claiming to have any more information then any other casual observer to all this, but to answer the question of why is the stock price rising?, in my mother's case, its because some dumbass calling himself a stock trader said there was a buzz and is forcasting the stock going through the roof after they win some lawsuit they're part of.

Re:SCO

Investors are not stupid? Are we talking about the same people who bought nortel at $126, then watched it collapse to under a buck, etc...

These are the same dimbulbs who gave us the tulip mania a century ago ($3000.00 for one bulb?!?)

Most investors ARE stupid. They follow the herd. They get less than the average return, because, when those margin calls come in, they HAVE to sell, unlike the large institutional investor who can ride out the dips. On average, the little guy loses, and the big guy gains. So, what else is new?

As to the original question - What have we missed? NOTHING. We're talking about a company where their legal counsel doesn't seem to be able to distinguish between patent law and copyright (should make him feel at home here on /. :-), and doesn't know that your statutory right to make a backup copy of ANY software is a minimal right that doesn't include greater rights (a la the GPL and multiple copies). The only thing we're missing is a poop-and-scoop to clean up after their shit.

The question was stupid. Okay, I'm done ranting.

Re:SCO

If that were really true, then if you are smart, you should be able to make a killing at the stock market.

Not so. Most people who play the lottery are stupid, too. But no amount of smarts is going to help you make a "killing" playing the lottery.

The stock market is similar to the lottery, except that the expected payback is usually somewhat above 1.0, instead of the 0.5 or so payback that most state lotteries yield. (I assume everyone here realizes that the an almost fraudulently advertised $100M jackpot figure does not represent acutal present value.)

Sure, some people do much better than average in the stock market, just as some people get lucky and win the lottery. However, much of that is dumb luck, and most of the rest is due to having inside connections and privileged information you can't access as a member of the general public.

Members of the public don't have enough information to reliably pick stocks, just as they can't predict which pingpong balls will pop out of the lotto machine. Thus, your best bet as an indivdual is to treat the stock market the way the state treats its lottery: diversify enough so that the individual gambles are irrelevant and depend on the overal odds to bring you revenue.

Re:SCO

What press? Slashdot stories don't count. Just did a Google news search on SCO... not one major media outlet on the first two pages. CNET was the biggest, and that's still directed towards techies. I work in a trading firm, and nobody I work with (granted, I'm not in the tech analysts area) have even HEARD of SCO, let alone the ongoing lawsuits and notices.

Trading volume on SCOX is THIN. about 1/20th of what IBM trades, not even 1% of Nortel's daily volume... hell, VA Linux (or whatever it's called now) trades more than 4x as much stock.

So no, there's is almost no mainstream press about SCO, we sit here with CNBC on all day and I don't think I've seen SCO mentioned once since this whole thing started. I've tried to point it out to traders around me, and they don't really care about the company one way or the other. Heck, the Reuters newsfeed on SCO barely has anything other than reports of large individual trades or press releases. But from Slashdot, you'd think that they've got major front-page headlines on 5 major newspapers, and an expose running on CNN 3 times a week.

So what you're getting is a small number of small-cap technology traders who have seen that this stock has skyrocketed in the past year, and they keep trading it in relatively small amounts. Speculative investors are seeing this as a company that's going up in value, and they want to get in while they can. When will the bubble collapse? When they lose in court, which could take years still, through stalling, appeals, etc.. Throw on top of that the very real possibility that they could actually WIN something if they get the right judge and convincing enough "experts" on their side. Even if they DO lose, since so few people outside of the tech circle care, the price could remain inflated for some time with the right amount of spin on the part of SCO, and investors trying to salvage their investment.

Just remember that just because everyone on Slashdot knows about it and knows it's bullshit doesn't mean that the rest of the world has a clue.

Skeletons in the closet

I personally find it hard to believe that there are NO skeletons in the Linux kernel closet. That is perhaps one of the advantages of closed source. Deeper closets...

Re:Skeletons in the closet

No; that's an advantage of open source: no closet. If there be skeletons, they be out in the open where they can be discovered by anyone looking for them.

Re:Skeletons in the closet

Arr, right ye are, matey.

If it's mod points ye be wantin', I have none.

Re:Skeletons in the closet

I personally find it hard to believe that there are NO skeletons in the Linux kernel closet. That is perhaps one of the advantages of closed source. Deeper closets...

But it's not the case that a single skeleton would destroy Linux. Judges don't say "wow, in this code base of 17 million lines there are 150 lines that belong to SCOX... SCOX now owns all of Linux". It doesn't work like that. The judge will do his or her best to award fair compensation but revoking the rights of 1000s of Linux developers isn't fair.

SCOX wants an outcome that isn't fair. That's the #1 piece of evidence that what they want is not going to happen. Judges don't like unfair! A contract can even be revoked if the judge thinks the outcome is unfair. There are special legal words like "equitable" that come into play and I admit I don't understand the finer details. But I'm certain that a fair outcome won't involve the judge revoking the rights of 1000s of Linux developers just to uphold the rights of 1 little Utah company.

If there is a skeleton and if it is significant and if the code isn't already in the public domain and if SCOX can prove they have clean hands and if there is no way to remove the code without destroying Linux... only then should we worry. Right now, we haven't even gotten past the first if statement. But that's what SCOX has to prove by Jan 11 (court order, no more delays) and we'll all find out about it roughly 2 weeks after that.

The way I see it is...

that this whole SCO thing is a lot like the .com fiasco. The craze may still be pumping those stocks, but we all know it's eventually going to burst. This is no different.

We have forgotten

... that the SEC takes years to investigate and try pump and dump schemes.

-- Cheers,
-- RLJ

Re:We have forgotten

Excuse me? You mean SCO exectutives aren't dumping SCO stock [sltrib.com]? It's not exactly an underreported story...

Think Pump and Squeeze

This is not strictly speaking a pump and dump. I call what SCO is doing "pump and squeeze". SCO is very thinly traded. That means most shares of SCOX are held by insiders and institutional funds. Only a small amount of stock is being sold on the open market. Small buys and sells of the stock move its price wildly. This means SCO can't just dump their shares on the market and make a killing. The price would drop too rapidly for them to move it all at a good price. What insiders can do is register planned sales of stock with the SEC and time their press releases to shortly proceed those sales. This allows them move chunks of stock at the high rate. Anytime the price dips too low for public consumption or a planned sale, they can make another outrageous announcement and pump it back up. The longer they have to unload their stock, the better this works. This is why they do everything humanly possible to delay the IBM and RedHat suits. Either one of those coming to a quick finish would destroy the pump before it finishes extracting money from the market.

They can also use the paper value of the stock as collateral to buy things. This seemed to work best by their buying Vultus (another Canopy Group company). In this way, they can allow the Canopy Group to show real profits with real money even though its really the Canopy Group shuffling things around. It would be risky for them to acquire outside companies this way since it would expose their scheme to more parties who either want their cut or sue them as well.

Re:Think Pump and Squeeze

This is not strictly speaking a pump and dump. I call what SCO is doing "pump and squeeze".

Sounds like SCO needs some fiber!

Re:We have forgotten

It's not a bloody pump and dump scheme.

Gods I'm tired of hearing this.

Corporate execs cannot just call their broker and say "buy!" or "sell!" when it comes to companies that they have insider knowledge on. You must file SEC forms months or years in advance, and there are time periods before routine announcements (10Q/10K) where you are prohibited from selling stock. Nobody has accused anyone at SCO of violating these rules. If you can, then go to the SEC.

As for Daryl, he has a mere fraction of his stock options. Go read the contract -- it's spelled out quite clearly in their 10Q/K statements. They didn't make a profit last quarter, so that resets the clock on the 100k (or 150k? I don't recall anymore) options that he would get for 4 profitable quarters. Oh, and even if he was awarded them -- guess what? He still can't sell them for 1-2 years under SEC and SCO regulations. The rest of his shares vest over a 4 year time frame.

If he wants to pump and dump then he's in an awfully bad position to do so -- he'll need to keep it going for 5-6 years in order to sell everything. Even though I expect the lawsuit to take 5+ years, the winds will be blowing for or against SCO well before the end. I still don't get why SCO took this course (other than the obvious cornered rat reason), but it isn't to pump and dump.

On the other hand, there are some very interesting money and stock manipulations happening with Canopy. If you want to look for someone doing questionable things, look there... not at SCO's execs themselves.

Re:We have forgotten

Well, it's not a traditional pump-n-dump, and you are right, the execs of a company can never just dump their holdings whole hog without raising lots of attention. But there are execs with tradable holdings and, damned straight, they are bleeding off shares - not rapidly enough to cause alarm, but they are doing it nonetheless. The CFO is selling off 5000-10000 shares a month [yahoo.com]. Senior Vice President Reginald Braughton has dumped at least 5,000 shares per month during 2003, totalling perhaps 40% of his holdings [yahoo.com]. Controller Michael Olson has dumped at least 50 thousand shares, about 50-60% of his holdings, during 2003 [yahoo.com].

Sure, Darl may not be getting a lot of options, but it's pretty clear that the secondary execs are trying to get as much out as possible. Can't say I blame them, they've made a lot in the last year or two, it would be foolish to leave it there when the entire share price is based on unrealistically optimistic expectations about lawsuit outcomes. Of course, this only comes out to a half million here, a half million there.

I'm sure that the big money manipulations are going on with Canopy et. al.

Invalid Assumption

You're assuming that stock prices reflect the "value" of a company - they don't. Investors aren't often all that smart and a bit of media buzz is often enough to make them invest. Media buzz != sound financial investment.

The fact that SCO is listing higher is an indictment on the mentality of investors not a reflection of the soundness of their legal case.

Re:Invalid Assumption

"Investors aren't often all that smart and a bit of media buzz is often enough to make them invest."

Investors don't buy stock in companies like SCO. Speculators do. SCO stock isn't an investment, it's a wager.

Enron?

Indeed, perhaps we need to remember Enron and many other companies. High stocks for quite awhile, even stayed up despite many whisperings of problems, and finally plummeting down to nothing. It wasn't because any of these companies had something special, they just acted like they did and allowed others to fall for what they though was "easy money"

POV

Point of view - that is primary thing most people forget when looking at things like that jump in share price. If you are working as a stockbroker, or even just an average joe that dabbles in the market, and you see this tech company (that has been around a while) claiming billions of dollars worth of licensing fees for its intellectual property, don't you think it'd be worth throwing a few dollars at them just in case they're right? Especially considering the magic words: 'intellectual property,' 'licensing fees,' and 'tech.'

It doesn't mean anybody has 'missed' anything, just that the people that invest in SCO are not doing so based on the technical or legal merits of its lawsuit.

I forgot...

to short 1000 shares of SCOX...Thanks for the reminder!

Stock investors smart?

Come now, the stock market is legalized gambling these days. It's a nice easy way to invest in a company. Investments are risks. The stock buyers are taking the risk that SCO is successful. I mean, what if they were? Certainly their stock would be worth probably what? 1000x current with actual Linux licensing fees?

Hell, do you know anyone who wouldn't take 1000 to 1 odds when the American legal system is involved?

A key thing to remember:

In many cases (especially with tech stocks), stock price has *nothing* to do with how well or badly a company is doing. In fact, if a company gets a lot of press, which SCO has, it often causes a lot of people to buy the stock, which in turn causes the stock price to go up. Was there really any good reason to be investing in the company? Probably not. Another example of an over-inflated tech stock, that will probably crash like so many other have.

We have forgotten...

We have forgotten to be humble.

We have forgotten not to act like those who we dislike.

We have forgotten to take the high road.

And this includes letters and statement from leaders in the community, as much as ACs on Slashdot.

Lottery Ticket

First off, wonderful submission. It's well-written, well-meaning, and helpful.

Now, are things different on Wall Street?
I trade stocks for a living. Some of it is daytrading. from the category Cliff chose, 'from the daytraders-and-lawyers-live-on-different-planets-t han-we-do dept.', the implication is that things work differently in the stock market. That's sort of the case, but not entirely.

The key issue here is potential; *if* SCO wins, it'll win $3B plus leverage vs every single linux user (if collectable, $699/installation for single-cpu installations, more for more processors; also $39(?) per embedded device). The payoff is huge and Wall Street functions on potential and leverage.

What does this imply (or explain) about SCOX and said stock price?
I once read an insightful quip in an investment article about SCO; the quip was 'Buying SCOX is like buying a lottery ticket'. Meaning, there's a huge potential payoff but, chances are, you'll get nothing. The SCOX stock price, hence, is an average of the perception of those two extremes.

2 years from now, SCOX will either be worth $100+/share or $0/share.

In conclusion, the rising stock price is a function of Wall Street's perception of the odds of this lottery ticket.

RD

Re:Lottery Ticket

*if* SCO wins, it'll win $3B plus leverage vs every single linux user

Yeah, and *if* monkeys fly out of my butt, I'll be able to open a circus.

Re:Lottery Ticket

"if collectable, $699/installation for single-cpu installations, more for more processors; also $39(?) per embedded device"

The problem with this is that if SCO wins in court, they still do not have the right to collect license fees for Linux. If part of the Linux kernel infringes, that doesn't mean SCO owns the rest of it - at worst, they'd kill the Linux kernel, and there are replacements in the works anyway. There is no long term business here, but $1B from an IBM win would be of some value in the short term. So the PERCEPTION on wallstreet may be that it's like buying a lottery ticket... Of course the perceived value of an actual court victory would make those shares, ummm, like lottery tickets after all.

Corrections

SCO have been ordered to produce their evidence against IBM by midnight on January 11th, 2004.

Actually, they've been ordered to state their complaints against IBM; evidence comes later.

Also, their deadline isn't midnight the 11th: as with all such legal matters, it's COB (17:00 local) on the deadline or the first Court day (the 12th) following it. The Clerk of the Court's receipt of the response is the magic timestamp, and the Clerk isn't going to wait up to midnight on a Sunday in the hopes that soon Darl will be there.

None of this matters.

Even if SCO pulls out some dramatic legal problem with linux, it can be worked around.

The great thing about the open source movement is its agility under pressure. When there's nothing making it move, its agility-- on things like, say, -- drops to zero, but when things HAVE to happen, they can happen blindingly quick. If SCO does in fact have some real proof of some legal issue hidden somewhere-- unlikely, because if they had it they probably would have played it by now-- I'm convinced the Linux community will find some way to resolve the legal issue and keep going without so much as a hiccup.

If such a thing arises, then is the time to worry about it. Until indications such a thing exists, though, there is nothing that can be done to prepare, so I can't see paying much thought to it.

So all we're we're mostly forgetting here-- though I've heard it on slashdot a lot-- is that SCO doesn't have to win to win. All SCO has to do is drag things out. In the end, SCO will lose the case and fade into bankruptcy.

What we're forgetting is that having lost and faded, the SCO execs will walk away rich from stock sales and laughing. Meanwhile, the over a year of SCO propaganda will have sunk deep into the heads of execs everywhere and will not come out easily, since the kinds of publications executives read will have reprinted SCOs initial, easy-to-grasp-without-thinking allegations vertabrim, but then probably once the truth comes out won't cover it at all since it's much messier and harder to write into a quick dramatic story. This is all we have to be afraid of, I think.

Donning the tinfoil hat

Are we sure this story isn't an SCO plant to spread FUD?

Two factors

1) Legal wrangling always has some uncertainty involved. If SCO has a 10% chance of winning the case, they get $1 billion. A 2 Billion billion dollar settlment times .1 is 200 Million, which is around their market cap.

2) Let say that investors fall into 2 categories, people of the opinion that SCO will win, and people who are of the opinion that SCO will lose.

The first set buy SCO stock, thinking their investment will pay of 10x. If they're wrong, they'll lose the investment. The second class of investors have to short sell the stock, especially since options don't seem to be available.

The second class of investors have a much worse situation. They can double their money, but if SCO wins, they could lose a great deal of money, in theory there's no limit. What's worse is that if there's a legal victory, the stock is likely to spike, making the possibility of cutting your losses before they get too bad difficult. The current trend is also discouraging. The stock has been slowly gaining value over the months. This would mean a short seller will have to keep pumping money into their initial investment, waiting for the moment when SCO's stock crashes.

If you fall into the second camp, I think the risk is just to vast and the payout too far away for people to jump on.

OTOH, buying puts looks like a much better deal, but they don't seem to be availible.

Not about right or wrong

You state that given a investment in SCO at the right time you would have made alot of money. That leads us to the point that before the rise in price they where a good investment. It has nothing to do with if they are right or wrong. As a investor you would look at the situation and try to estimate how many people are going to buy and how this is going to effect the price. If I buy and everyone else does after me then guess what, I just made a bunch of money. Hell most investors could care less what the companies name even is as long as the deal results in a gain.

The core of the lawsuit

Everyone's forgotten what SCO is actually suing IBM for. It's not copyright violation. It's not patent violations. It's a contract violation.

The crux of the matter, as I understand it, is that SCO is claiming that the SystemV contract specifies that they retain control over everything developed for SysV Unix -- regardless of who actually does the development. If you want to kick this back into copyright law (which is likely to become relevant), then they're saying that whatever you made is a derivative work. Even though you may license the SysV code it doesn't mean you can do whatever you want with derivative works.

There's a shitload of smokescreening going on, and SCO has made some really amazingly stupid claims (mostly their execs, not their lawyers, although the lawyers have made some stupid claims as well), but it really does get back to this -- is SCO's read on the contract the proper one? It's not a cut and dried answer. The contracts are very old, have passed through many hands, and have several court cases associated with them. The wording isn't clear either.

Personally, I still think SCO's smoking a big crack rock -- their interpretation of the contract is overly broad and utterly insane. But IANAL.

A coworker (ok... technically my boss) asked me yesterday when I expected the lawsuit to be resolved. I immediately replied 5-10 years.

Anyone who thinks that this is going to be finished before then is smoking one right along with SCO.

What do you mean they aren't fools?

Look at how fast SCO execs (the people with the real knowledge of how good their case is) were DUMPING their stocks.

Lots of people buying stocks are fools. Look at how many of them lost money during the "dot com boom".

What if...

It is not very far-fetched to assume that SCO's tactics have been almost solely targetted at boosting their shareholder value. This year might be different however. If SCO doesn't come up with concrete irrefutable evidence to support their claims they might end up hurting the very shareholders they have been trying to appease.

Unless...they get taken over by some bigger company with an eye on the pie they have baking...

What I'm trying to get at is that with a market capitalization of merely 250 million and with the intellecual property claims they are making they are begging for IBM or (maybe even) Microsoft to buy them out.

Far fetched? Probably. But imagine if the SEC & the European regulators were to allow such a thing to happen?

(just remember where you heard it first)

For all you Canadians out there...

Remember BRE-X?

http://geology.about.com/cs/mineralogy/a/aa04209 7. htm

You could have made a mint on it if you bought in at the right time. The stock went into the $200 plus range, then became worthless over a period of a week.

History repeats itself.

"Many eyes"

You know, after reading this post I was shocked. I don't track SCO at all, and I don't follow the case, but I assumed from all the derisive posts I'd read here that SCO's stock was in the dumper. I wonder if that's revealing.

The parent invokes the "many eyes" image as if that will necessarily mean SCO's downfall. But the parent implicitly acknowledges is that there are ALSO "many eyes" - in the market - actually, make that "many many eyes" that are scrutinizing the case and that seem to be voting that they believe there IS merit to the case.

There's several possibilities here, one is that the smart money's just playing up the price until every-day-joe jumps in and buys, at which point the smart money will dump it. Given the length and depth of SCO's rally, I think this seems unlikely (but I've been wrong many times before).

Another possibility is that maybe - just maybe - the market knows more than Slashdot zealots know - or will let themselves admit. Maybe a lot more companies than we know are paying SCO's licensing fees. IANAL, but maybe their case has much more merit than you would guess from reading /. Just because we want something to be true does not make it so.

A third possibility is that SCO's price rise is just an unhappy coincidence completely unrelated to the legal action. Who knows, maybe the case will fall flat on its face and SCO will go in the crapper as so often predicted here. The market has been wrong many times before.

But one thing is clear, you can't get a good sense of what is going on by reading the opinions of chauvinists - like, say, here or on any of the forums populated by people who've gotten rich or hope to get rich holding SCO.

We have forgotten that...

...SCO's stock is now more overvalued than a startup in Sunnyvale that plans to revolutionise the world of garden gnome retailing by harnessing the power of this new Internet thingy.

We forget...

SCO has had a lot of press releases that apparently have nothing to do with the case. They sued IBM for breach of contract and copyright infringement. "Lots of Unix code has gone into Linux." That is the file system JFS, NUMA and RCU, and some SMP stuff.

JFS was originally written for AIX, then rewritten from scratch for OS/2, and then ported to both AIX and Linux. So it's the OS/2 version we have in Linux now. I can't see how SCO is going to pull this, and I don't think they know themselves. If the court decides SCO owns the rights to JFS, it would be like IBM worked for SCO under a slave contract (do slaves have contracts?). Everything that touches Unix would be the property of SCO. They would never sell another license if that happened -- if the GPL is viral, SCO's license would be alienesque (like Ridley Scott's Alien, that is).

So SCO is threatening everyone else too. They want $3.50. I mean $699. If anything that has touched Unix in some way is their code, the fact that IBM has dumped some such code into Linux would make Linux their code too. So the case is absurd. Or it seems to be. It looks like Nigerian scam-spam: It's far too good to be true (for SCO's investors: if they win, they own the world), and it probably isn't. But with the media coverage SCO gets, at least some people will be stupid enough to buy stock.

In the meantime, maybe SCO actually has a few extra cards up their asses^H^H^H^H^Hsleaves, and maybe they actually have a case. But it's not the same case they play through the media.

Incorrect assumptions

It is incorrect to assume that all investors in the stock market -- or even a majority of them -- are making decisions based on sound data.

There is one theory that is widely regarded in the investment world, usually called the Efficient Market Hypothesis. It states that the stock market is efficient, that at any given time all public factors relating to a given issue (company) have been considered by intelligent investors and that the price of a company's stock always accurately reflects the value of the underlying business.

The problem with this theory is that it is utter nonsense. People buy companies based on all manner of crazy metrics: whether a certain football team won, a company seeming like a "sure bet," or some charlatan hawking the latest penny issue (that he purchased in large quantity before making the recommendation.) And price, by the way, is determined by supply and demand.

Now, that might make for a very boring story, but it is relevant in the following manner: there is another valuation model that more accurately reflects the way the stock market actually works.

It's called the Greater Fool Theory.

The definition of the Greater Fool Theory has changed over time, but a current definition is: a fool buys a stock without any sound fundamental analysis hoping to sell it at a profit to a greater fool, who expects in turn to sell it at a profit to a still greater fool. Rinse and repeat.

SCO may well have a case. I really don't know, but you all had better believe that the Greater Fool Theory played a big role in SCO's meteoric rise.

Pyrrhic victory?

True, we are well past the need to emphasize how ludicrous SCO's behavior is assuming they want to win.

But what if whoever is behind this actually wants SCO to lose? Might an IBM victory actually be engineered to be Pyrrhic for Linux?

Consider that both SCO's case and the GPL revolve around the notion of derived work which is legally up for grabs. Might SCO's claim -- that all things UNIX belong to them as derived works -- get laughed out of court in a way that actually weakens the somewhat similar provisions of the GPL?

What if the goal was to downgrade the GPL to a legal equivalent of LGPL or even BSD? (The GPL hopes to make "linking" a criterion for "derived". Is SCO trying or even in a position to make such a claim and get it struck down? I don't know.)

Yes, I realize the situations are different (contract law here, copyright law there), and this hardly explains the investor frenzy on SCO. Still maybe worth keeping in mind...

Truth is a slippery fish

What most people have forgotten is that truth is a slippery fish. The SCO stock price, I believe, is due to the the fact that they can make a claim about Unix intellectual property. It is the leverage of this claim that drives the price up, not the truth in it. I doubt, any large investor has bet the farm on SCO, but rather see it as long shot that just might pay off if SCO gets purchased.

Clearly investors are not blind to SCO's situation. They are a sinking ship and are trying to rescue themselves anyway they can. Indeed, I believe from the beginning, their strategy was to try and convince IBM that buying SCO was the cheapest solution. I say this because these type of investors are not interested in a long drawn out court battle. It will take ten years to sort all this out, which is far to long for the typical large investor.

Furthermore, evidence to the buy me so I do not hurt you tactic can be found in overtures that have made towards Goggle. Simply put, Goggle is looking at $10+ billion dollar IPO which could be severely harmed by a lingering intellectual property lawsuit from SCO. So what does SCO hope Google will do? Why buy them with some pre-IPO shares and end all the legal problems. Guess who makes out incredibly well the day of the IPO by selling their shares?

Other than picking a fight with IBM, they have done nothing but post press release and send letters to create FUD in the market. So what to do? Get back to work, ignore SCO. Do what go us here in the first place -- write code, solve problems, use Linux, and plan world domination

Check out the Numbers

Livecharts SCOX Values [lycos.com] Check out the detailed quote and add a volume study. Insiders own about 45% Institutions about 31% That only leaves 24% laying around to trade. Volume is really low. Looking at the time and sales for the past few weeks there have been almost no large block trades. With so little trading volume it's probably relatively easy to keep the price up. We'll see what happens with the institutionals after the 11th of Jan.

Some things forgotten

Here are some rather random thoughts:

- patience. "we" keep forgetting to be patient
- focus. "we" got baffled with bullshit alright
- history. "we" should have *started* with looking into the USL/BSDi case. That's where it'll end and it was very predictable.
- agendas. "we" are stupid to follow the "ememy of enemy equals friend" idea. Distrust Novell. Distrust IBM. Trust me on this ;-)

But most importantly, IMHO "we" forgot "our" role in all this. "We" played right into SCOs hand with the endless detail delving. No one but "us" cares. All they see is freaky commie geeks. Of course Darl knew and knows that. He made "us" jump on command. People have rightfully called him the comic relief but to most outsiders so are "we".

So what then? Here's something: sit and wait, perhaps document what happened when if you feel the need to. Write a book about it, someone will (please don't let that be JonKatz or ESR).

Speculators vs. Investors

The runup of SCO's stock seems like it's due to a couple of things:

• 1. Short term speculators acting on the press release of the day to time the rise and fall of the stock.
• 
  2. Medium term speculators who can afford to lose the money and see the potential gains as worth the risk.
  3. The scarcity of the public stock. It's a very closely held company.

The buyers of SCO stock aren't really investors - they're in it for the short term...SCO is a vehicle for making money and nothing more. There are plenty of examples of SCO-type speculators out there. We focus on SCO because the IP issue is near and dear to our hearts, but from a financial point of view, there are a hundred SCO's to chose from if you want to put your money into an extremely volatile stock.

"Investors", the people who look out for more than a year at a time, aren't putting money into SCO or its ilk. They're looking at capital gains, not short term income. Now, there's nothing wrong with either way of investing, but I'm not sure that the volatility of SCO's stock is any indicator that we've forgotten anything.

And, to your other comment, certainly it's worthwhile to rally around IBM, but, in the end, it doesn't matter if we're all on IBM's side or not. The court will decide SCO's and IBM's cases on their legal merits, regardless of who has the larger fan club. But I understand your sentiments...and you probably already knew all of this anyway!

-h-

Fools?

"The men and women who play the stock market on a regular basis are no fools and something unknown to Slashdot readers made the SCO stock price rise by 2.4%, on December 26th, over half a days trading."

People who PLAY the stock market ARE indeed fools. The only real winnners, it's been proven over and over, are the ones who buy stocks of companies that provide real value and hold on to them long term.

More like 'What have we learned?'

The answer is something I've known for a long time: the stock market has ABSOLUTELY NOTHING to do with reality! It's a terrible indicator of the health of a company or the real strength of our economy. When I'm President, the first thing I'll do is shut down Wall Street. All corporations will become public non-profits, and investments will be treated as loans to be paid back with interest, not perpetual debts that can never be paid off.

Vote Krumwiede in 2012!

Sir, in regards to your rambling question...

Presuming that this is a legitimate question and is not just someone doing a Kevin McBride impression... Go to the Yahoo SCOX message list and ask this question instead. Rather than being called a phallus smoking teabagger, you will get decent answers from people who understand stock manipulation and how it is performed. And stock manipulation is exactly what SCOX is. As for your whinging about not having a new speedboat, stop it: it's irritating.

Stock Market

We have forgotten that the stock market has its own rules.

There are many reasons why SCOX is rising this year. One has been mentioned a couple times already: The lottery ticket theory.

Then, once a stock is rising, it usually drags investors in. Definitely the dumb kind ("oh, it's going up. Must buy"), often the smarter kind, who plan on selling it again as soon as it shows signs of dropping.

Also mentioned already was that SCOX doesn't exactly have a huge volume, so it can be moved by fairly small trades.
And you can bet that Canopy and other investors do everything they can to drive the price up. It is, after all, part of their "net worth".

It all boils down to this: Even if SCO is doomed to fail in the end, from an investment perspective, it can be smart to buy them right until the moment said end starts to happen.

The lawsuit certainly has a much smaller impact than you think. It is easily overshadowed by the press releases and quarterly reports.

Disclaimer: I used to work for a broker, but only for a short time and it's been a while.

A repost from Groklaw

I think this covers it well...

Posted By: Anon
*Its become patently obvious that this entire lawsuit soap opera was carefully
planned ages ago, and it is succeeding in its primary aims. From the point
SCOG's stock became worthless, and the spreadsheet numbers were projected ahead
to reveal that SCOG was essentially dead no matter what, this project became a
no risk proposition. There is no case, there never was; the whole point of the
"lawsuit" was to waltz up to the biggest IP giant on the block and
slap them in the face, simply to get the largest shock value and the highest
possible media exposure. They *know* IBM will kill them, they also know how long
it will take this glacier to move down the valley. The attack on Linux (outside
the courtroom) is a simple red cape waved to enrage the zealous bulls in the
tech area, and provide a venue to disburse pearls of FUD *seemingly* supportive
of the bogus claims, the details of which will zoom safely over the heads of
investor-types. They will see this as a suits vs. bearded freaks issue and
choose who is making the credible claims based on that alone, and some will
invest cash accordingly. The stock is held in a way that lends itself to easy
manipulation, and they can sell THIS proposition to *outside investors who think
they are inside*, who are investing as a way to make money on the transitory
stock prices, NOT the value of SCOG as a going concern with any hope of a big
recovery. The GAME is to sustain the illusion of the stock value (created by all
the hubbubb and wild claims) long enough to pass the stock holdings from the
real insiders to the dufus outsiders, before the whole theatre folds. The method
used to carefully milk the stock prices without precipitating a sell-off is the
only portion of this drama that will require real skill, and every single day
that goes by with more stock cashed out is a complete WIN, even if there is a
good amount left on the table when the shoe drops. The Big Name Lawyer is on the
payroll to keep the Real Insiders out of prison, and encumber any assets left on
the corpse of the dead company to proxies of the principle players and the
!insider investors, he's the Elihu Root telling them HOW to do what they WANT
to do, working completely behind the scenes. The courtroom end is being handled
by a sock puppet wearing clown hair, as any money or effort spent there is a
hopeless waste of resources; maximizing the time taken for the procedural flow
is the only point of even showing up in court. The ball is rolling, now all they
need is a voice (any voice) in the courtroom saying "yeah yeah whatever,
can we have more time". There is no point in getting all hung up in the
hedgerow country of the details of ANY of SCOG's infringement FUD. If you want
to play the "you attacked Linux, prepare to die" card, the only
target of any consequence is the balancing act of the stock prices. The wind of
truth from a butterfly's wing can tip that one over the precipice, under the
right conditions. *

Note: Insiders are not necessary employed by SCO or even the holding company that owns SCO.

Why investors buy SCO stocks

It is a very rare situation which we currently have with SCO stocks that there is publicly available information which makes it possible to determine beyond any reasonable doubt whether a stock is overvalued, undervalued, or appropriately valued (in this case it's grossly overvalued).

Because trustworthy information of this kind of information normally isn't available, investors make their investment decisions without first looking for "something like Groklaw".

Some investors will think "hmm maybe SCO actually has intellectual property in Linux, in that case their stock is grossly undervalued"... even if they consider the probability of that to be pretty low, it will appear reasonable to them to have a small (in relation to their total portfolio) SCO investment.

Some investors will think "I sure hope that this doesn't work out for SCO because I have investments in companies which will be hurt if GNU/Linux isn't free anymore", and they may decide to buy some SCO stock as part of a risk management strategy (to prevent unacceptable big losses in the case that an SCO victory kills GNU/Linux).

Some investors will think "Those SCO statements sound like utter nonsense to me". These won't buy, but they won't sell either - because they don't have SCO shares, and because "shorting stock", i.e. borrowing shares with a promise to give them back at a later date is difficult (impossible for small-time investors?) and very risky (even if we know that SCO stock will go down in the long run, it is quite possible that they temporarily might go up by say a factor of five for a short period of time before then, and if that's the time when you have to buy because you promised to give back those shares, you lose a *lot* of money).

The above analysis shows two categories of investors who are inclined to buy and one category of investors who are not likely to take any action.

This is consistent with the observed share prices.

The Bigger Idiot Theory

I think what at least some of the investors know, and we do not, is The Bigger Idiot Theory. In real estate, you sometimes buy a property and then find out it's either overpriced, or a dog. That's when you start buffing up the property and looking for a bigger idiot than yourself.
It's entirely possible that many of these traders don't know or care if the SCO arguments are valid. They could well be banking on finding the bigger idiot before the day of reckoning.

We forgot to underestimate people.

"Never underestimate the power of stupid people in large numbers" says the old cynic, and it is just as applicable in its own way to SCO. "Never underestimate the power of greedy people who can hire lawyers". Sure WE could see that the SCO case was built on hogwash from day 1, so could most of the industry, which is why it has had little or no impact on the use of linux. However, all that aside, its still a way to make money if you can ride the bubble and get out before it bursts. If you feel you're good enough at playing financial chicken with the stock market, then yes, you can make a lot of money.

What WE forgot was that just because something has no technical merits doesn't mean it can't have some short-term financial merits. The same thing was true of the dot com bubble. Ultimately most of the businesses being developped were nothing stable, and couldn't survive long or turn a profit. That is irrelevant, however, when it comes to 'herd mentality' - because when you get enough people together they are governed by their lowest common faculties - which normally means desire and fear. Even investors who knew that the dot com thing was an artificial bubble would jump on the bandwagon, because if you could get out soon enough, you could really clean up nicely. Likewise, you don't have to believe that SCO has any chance in hell of winning, you just have to gamble on the greed of many other people and hope that it might cause enough noise to get you rich before it bursts.

It's going to go up until it crashes

The most important thing about the stock market is that you can sell your shares at any time, for the going rate. This means that it isn't necessary for a company to have any real value at all (in terms of paying dividends) to have a stock that will make you money. SCO has demonstrated that they can impress the market. Even if everybody agrees that SCO will be out of business in 3 years, it's a good bet that SCOX will go up at some point before then.

SCO's chances in court are unrelated to the value of SCOX. SCOX is a good deal at $10 today if it can be sold for $11 some time next week. SCO's PR only matters to the value of SCOX because it matters to the people who might buy SCOX from you later.

Stock Price and Reality.

One thing to remember, is that the SCO stock price is based upon absolutely nothing. It even went *up* on the negative news of SCO having to give IBM discovery evidence.

There *are no* fundamentals for this stock.

SCO no longer has a product.

SCO no longer has any customers willing to stick around except for the few who absolutely need legacy software.

SCO has totally blown its future market, c.f., "we view contracts as something to use against our customers"

What has inflated SCOX's price?

1. Market manipulators painting the stock price during low volume.

2. Shills on MSNBC and elsewhere promoting the stock with bad information.

3. Darl & Co's "let's put out a press release every time the stock sags". "Journalists" eat this up and quote them in MSNBC and Forbes.

4. This is the most important one. Short interest. There is so much short interest right now that there are few stocks to be borrowed at all to short. SCOX is shorted up the ass. With no supply of stocks to buy or short, the price gets driven up.

Is the price up because anyone thinks that SCOX has any case against IBM? Nope. The discussion on Yahoo's SCOX bulletin board consists of two sides: pumpers and dumpers. The dumpers usually argue (99 percent of the time) with facts culled from Groklaw and other places. The "strong buys" are nothing but "sound and fury signifying nothing"

Those of you who are kicking yourselves for not buying SCOX in March shouldn't feel left out. This stock is only good for day traders and gamblers. The question is not *whether* the stock will tank, but *when*.
--
BMO

Stock market dynamics & the legal system

Speaking as someone who works in the Financial Services space (and has done for a couple of decades), a couple of points are worth mentioning:

1. The stock market is notorious for both over-valuing, as well as undervaluing, especially towards the start of an investment cycle. It does seem as though the "run up" phase of SCO's price is about over - the market has now valued the stock on the assumption that SCO will win. For those of us (me included) who believe that SCO's case is baseless, this is now an excellent time to short the stock. As soon as SCO starts losing aspects of their case, their stock price will plummet through the floorboards.

2. IANAL, *but* I think many of us have forgotten quite how slowly - but inexorably - the legal wheels grind. None of us should be particularly surprised that not much, legally speaking, has happened yet. This series of cases (remember there are multiple cases involved), could literally take years before the dust has all settled...

The judge

One thing that concerns me is that the judge will not know anything about source code or software development and will not be able to make a fair determination of what constitutes derivative works in this case. Please correct me if I am missing something.

Class action countersuit from Linux developers

What have we forgotten?

It's simple. The contributors to the Linux kernel have forgotten to file a high-profile class-action countersuit against SCO for copyright infringement. Every person who has contributed original code to the Linux kernel can sue SCO for copyright infringement if SCO sells their copyrighted code for profit because the GPL does not specifically renounce claims to copyright. This would be software piracy. Because each person has only contributed a small portion of the code, an individual lawsuit against SCO is unprofitable after paying the legal bills. However, a class-action copyright infringement lawsuit is another matter.

For maximum effect, the lawsuit must not be filed quietly. When the lawsuit is filed, a press release should be prepared and sent to all major media organisations in the U.S. and select ones from other countries. Chances are some media organisations will report this lawsuit as news. Once this lawsuit is filed, people will think twice about buying SCO stock and the stock price will start to fall. If institutional investors decide the stock isn't worth the risk, the stock price will crash so hard it will leave a crater.

Disclaimer: IANAL.

(Sigh) For the tinfoil-hatted /.ers

It's very simple, really: A lot of people think IBM will ultimately capitulate and buy SCOX out, win or lose. If that happens, then they get paid (i.e., their stock is bought out.) This kind of thing happens on Wall Street all the friggin time.