SCO: Microsoft played no role in VC fundraising

The SCO Group said Thursday that Microsoft was not involved in raising venture capital funding for the company, dismissing claims that a leaked e-mail demonstrated that Microsoft had helped raise tens of millions of dollars for SCO.

An e-mail from an outside consultant to SCO apparently involved in brokering deals for the company was posted to the Open Source Initiative Web site Wednesday. The consultant in the e-mail suggests that Microsoft "brought in US$86 million" for SCO and that between US$16 million and US$20 million is underway.

The e-mail links Microsoft to the US$50 million invested in SCO by a group led by BayStar Capital that was announced last year. BayStar was "a Microsoft referral," according to the e-mail.

Microsoft and Sun Microsystems Inc. signed Unix licensing deals with SCO in 2003, earning the company US$13.5 million, but the leaked memo appears to suggest that SCO has made far more money off of Microsoft than previously thought.

SCO on Thursday confirmed the authenticity of the Oct. 12, 2003, e-mail, but dismissed its contents.

"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. He was told at the time of his misunderstanding," a SCO spokesman said.

The e-mail was sent by Michael Anderer of S2 Strategic Consulting LLC to Chris Sontag, a SCO senior vice president and general manager of the company's SCOsource division and to Robert Bench, SCO's chief financial officer. The SCOsource division oversees licensing of the Unix vendor's intellectual property.

SCO has drawn the ire of the open source community by claiming its copyright-protected code was illegally copied into Linux. SCO has sued IBM Corp. alleging copyright infringement and breach of contract and earlier this week sued Linux users over their use of the open source operating system.

Open source advocate Eric Raymond in comments on the leaked e-mail said it represents a "smoking gun." It confirms that Microsoft, which has identified Linux and open source as one of its main competitive threats, is doing much more than buying a license on Unix technology from SCO, according to Raymond's comments on the Open Source Initiative's Web site.

Raymond is incorrect, the SCO spokesman said. "Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the BayStar transaction," he said.

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