Caldera and SCO Make Multiplayer Trade

SAN MATEO (08/04/2000) - When it was made official this week that Caldera Systems Inc. had agreed to acquire The Santa Cruz Operation Inc.'s (SCO's) Server Software Division and Professional Services Division, officials at both companies said the transaction would result in an open, Internet-based development platform that allows Unix, and particularly Linux, developers to create much-needed, highly scalable applications for data centers.

Contrary to that rosy picture of synergism, however, a less optimistic reason drove the deal, according to one analyst.

"SCO has been under a lot of pressure because Linux had been eating at [the market share of those two divisions]," said Tony Iams, a research analyst at D.

H. Brown, in Port Chester, N.Y.

Iams said SCO considered entering the Linux market but that its corporate leadership felt uncomfortable with the open-source distribution model.

For its part, without the two endangered divisions, SCO can now concentrate more aggressively on its Tarantella software, client-to-server technology for running applications remotely, according to company officials.

"Now SCO can focus revenues and attention with Tarantella as the main thing," said Tamar Newberger, director of server product marketing at the Murray Hill, N.J.-based company.

Also central to the deal are SCO's UnixWare operating system and associated high-availability clustering software, products that are generally considered to be capable of scaling significantly higher than the currently available versions of Linux.

"We now have the UnixWare kernel to build on, which we need to expand the data center's capabilities across the Internet. We will then put a Linux personality on top of that," said Ransom Love, presently Caldera's president and CEO.

As a result of the deal with SCO, Love will become CEO of the new Caldera.

Along with that UnixWare kernel, Caldera, previously a pure open-source company, now also owns its first closed-source, or proprietary, code embedded within UnixWare.

Handling the proprietary code poses a new set of issues for the Orem, Utah-based company.

"Caldera was a pure Linux distributor, but now they have all this closed-source Unix from SCO," Iams said.

"They can't just open up the closed code and say, 'Here you go'; they can't afford to open it up," Iams said. "What is there left to sell if everything is open source? So they're thinking of making it more open but slightly restricted."

Iams said the Unix code that Caldera received contains licensed technologies from previous suppliers, namely AT&T and Novell, which create roadblocks in opening up the source code.

"That's always the problem when you start with closed source," Iams said. "And Caldera has to be careful. They want to keep the revenue coming in but at the same time they want credibility in the open-source community."

The deal at a glance

Caldera diversifies with acquisitions.

* Caldera acquires the assets of SCO's Software and Services divisions.

* Caldera gains exclusive distribution rights for SCO's OpenServer.

* Caldera Services Division is formed.

* SCO receives 28 percent ownership of Caldera.

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