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 From : Sergey Lentsov                       2:4615/71.10   10 May 2001  17:11:06
 To : All
 Subject : URL: http://lwn.net/2001/0510
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 Leading items and editorials
 
    The Caldera/SCO deal completes. Caldera Systems - now Caldera
    International - [47]announced on May 7 that its acquisition of much of
    SCO had finally been completed. It has been a long process - the deal
    was originally announced last August. With this [48][Caldera/SCO]
    acquisition, Caldera now claims to be "the largest Linux company in
    the world." Certainly it will be a change for the company, and perhaps
    for the Linux industry in general.
    
    Caldera is getting SCO's Server Software and Professional Services
    divisions, along with UnixWare and OpenServer. This all brings:
      * A vast increase in headcount, quadrupling Caldera's staff to over
        700 people.
      * A major increase in cash flow. Caldera's revenue for the quarter
        ending January 31 was just over $1 million. Throw in the SCO
        divisions and that number jumps to almost $25 million. Similarly,
        revenue for the year 2000 goes from $4.3 million to
        $143.5 million.
      * SCO's massive sales channels and marketing organization. Caldera
        now claims over 15,000 resellers worldwide.
      * And, of course, the proprietary UnixWare and OpenServer products.
        
    None of this comes for free, of course. SCO gets $23 million in cash
    now, another $8 million in installments after a year, and 16 million
    shares in Caldera. If Caldera manages to make more than expected from
    OpenServer, SCO gets a 45% cut of the excess as well.
    
    All that revenue looks nice, but it's best not to lose sight of the
    overall picture, as found in [49]the registration statement (warning:
    2MB of legalese) filed in March:
    
      Caldera has not been profitable. The server and professional
      services groups have not been profitable and their revenue has been
      declining.
      
    Somehow Caldera is going to have to find a way to arrest the fall in
    SCO's revenues while cutting enough costs to actually make a profit.
    As an added little challenge, Caldera gets the costs of the SCO groups
    immediately, but none of their accounts receivable or bank balances,
    meaning that those groups will be a dead weight until the new invoices
    go out and get paid. Caldera has money in the bank, even after handing
    $23 million to SCO, but it may well see those reserves shrink quickly
    in the near future.
    
    Caldera's hopes, of course, are to work the company firmly into the
    enterprise market by way of SCO's existing extensive customer base and
    deployments. The current UnixWare and OpenServer business can be
    extended by improving those products' interoperability with Linux.
    Meanwhile, as SCO customers begin to think about transitioning over to
    Linux, Caldera will be very nicely positioned to help them out. With
    luck, SCO's customers will drive Caldera's Unix and Linux business for
    years to come.
    
    It might just work, if Caldera can manage to keep the attention and
    loyalty of SCO's customer base, and if it can get revenue and expenses
    a little better in line. Those are big ifs, but nobody said that the
    business world was easy. This is a new phase in the development of the
    Linux business community, we're most curious to see how it will turn
    out.
    
    No profitable businesses? That said, give us a moment to gripe about
    one sentence buried deep within the Caldera/SCO registration
    statement:
    
      Caldera knows of no company that has built a profitable business
      based in whole or in part on open source software.
      
    Is it really true that no open source company has been profitable? How
    about:
      * [50]Sleepycat Software has been doing nicely with the Berkeley DB
        for years.
      * [51]Digital Creations has built a solid business on Zope, and was
        briefly profitable before taking a new investment and launching
        into another expansion phase.
      * [52]Prosa srl was doing well before its acquisition by Linuxcare,
        and is now reborn from the ashes of that mess.
      * [53]Cygnus Software was an open source company way back before
        most people had heard of free software, and did very well.
      * [54]Red Hat, which bought Cygnus, is closing in on profitability.
      * [55]Cybersource has been doing well in the support business for
        years (see [56]this week's Letters to the Editor Page).
      * It is not much of a stretch to include [57]O'Reilly & Associates
        on this list.
      * Let us express our apologies right now to all of the profitable
        companies that we left out.
        
    Business is hard, and free software business may yet prove to be
    harder than many others. But it should not be said that nobody has
    succeeded.
    
    PriorArt.org enters the software patent fray. A new site called
    [58]PriorArt.org has [59]announced its existence. This site is
    positioned as a way for free software developers to avoid having their
    techniques patented out from underneath them.
    
    The idea is this: patents can be invalidated by a demonstration of
    "prior art" - proof that somebody else had already invented the
    technology of interest. Prior art must be documented, however; it's
    not enough for somebody to say that they were using a technique years
    ago. It is also highly preferable that the prior art be available to
    patent examiners when a patent is applied for. When the information is
    easily available, the patent should be denied at that stage. Otherwise
    a court case may be required to bust a patent that has been issued,
    and that is an expensive proposition.
    
    So PriorArt.org is inviting free software developers to disclose their
    innovations through their site. Disclosures go into a large database,
    which may be searched by anybody. It is claimed that this database,
    which is maintained by [60]IP.com, is consulted by patent examiners.
    Disclosures are timestamped and notarized (somehow) so that there is
    no doubt as to the timing of any particular discovery.
    
    This approach thus differs from [61]BountyQuest, which focuses on
    digging up prior art to break patents which have already been granted.
    
    The service is not truly free. The normal charge for this sort of
    disclosure through IP.com is $19.95. This charge is not being waived
    for free software disclosures; instead, [62]donations are being
    solicited to purchase "publication vouchers" for free software
    inventions. IP.com thus hopes to make money from this operation - and
    an extensive database full of inventions could prove useful as well.
    
    Any effort which helps defeat software patents is helpful, certainly.
    There are some problems with this approach, though, that could affect
    its long-term success.
    
    For example, consider the problem of who will actually disclose
    inventions through this system. Free software developers are busy
    people who are unlikely to find the time to write up every "invention"
    and feed it to a web site - especially a web site for a proprietary
    database which requires a credit card number even to submit a "free"
    disclosure. Remember also that the most obnoxious software patents
    cover techniques that seem obvious to developers. Reasonable hackers
    don't tend to think that a little function they just put together
    might be patentable.
    
    Disclosures will also be limited, of course, by the number of
    donations received to pay for them. At $20 per disclosure, the bill
    could get high fairly quickly.
    
    But, more to the point, free software developers already disclose
    everything they invent, in the clearest possible form: working code.
    Source repositories on SourceForge and many other sites contain a
    detailed, time-stamped history of free software development. Rather
    than try to convince developers to write up their techniques, it would
    be preferable to find a way to mine the incredible database of prior
    art that already exists. A detailed of the kernel, gcc, emacs,
    PostgreSQL, or any other significant free software project would
    probably yield more prior art than will ever find its way into
    PriorArt.org.
    
    In the end, however, this is all defensive action, based on the idea
    that the patent system is really OK, the only problem is that
    insufficient information is available to patent examiners. If you
    believe that the real problem is in the concept of software patents to
    begin with, these approaches will seem inadequate. Wouldn't it be
    better if we could fix the patent laws, and prevent software patents
    from being implemented where they do not yet exist?
    
    Bruce Perens: Software Patents vs. Free Software. For a different
    approach to software patents, consider [63]this lengthy piece by Bruce
    Perens:
    
      Ironically, some of the biggest patent holders are the Free
      Software Community's own partners, companies like IBM and HP that
      have aggressively incorporated GNU/Linux into their business plans
      and expect significant revenue from it before long. IBM is said to
      hold 10% of software patents, and HP is one of the largest patent
      holders in general. It's important for us to start a dialogue with
      these and other partners. That's why I am calling a summit meeting
      on Free Software and The Law.
      
    This meeting will have some specific goals, including getting a formal
    promise from the companies involved that they will not sue free
    software developers for patent infringement. Even better would be a
    promise to defend developers from patent suits brought by others. The
    companies involved in the meeting are, after all, benefitting from the
    work of these developers.
    
    It will be interesting to see what comes of this summit, but patience
    will be required - it's happening at the end of August, after the
    LinuxWorld conference.
    
    Inside this week's Linux Weekly News:
      * [64]Security: Immunix 7.0 released with licensing changes,
        Turbolinux "spring cleaning", OpenSSH 2.9, new vulnerabilities in
        cron, Samba, minicom, and man-db.
      * [65]Kernel: Buffer cache, page cache, and block I/O; ReiserFS:
        ready for prime time; ESR confronts brutality and heuristics.
      * [66]Distributions: Yellow Dog Linux 2.0, an introduction to the
        development team behind it, the Debian Weekly News returns and
        Slackware moves up to Gnome 1.4.
      * [67]On the Desktop: Desktop speed, Gtk+ 1.3.5, Mozilla 0.9,
        Multimedia with Fer de Lance.
      * [68]Development: LinuxFund grants awarded, LSB 0.9, Cal3D, OpenSSH
        2.9, Apocalypse 2.
      * [69]Commerce: Craig Mundie's speech, Playstation Linux update.
      * [70]History: The Wang patent lawsuit, AFUL founded, Ken Thompson
        trashes Linux, Free Standards Group formed.
      * [71]Letters: The Linux support business; responses to Mundie; the
        trouble with packaging systems.
        
    ...plus the usual array of reports, updates, and announcements.
    
    This Week's LWN was brought to you by:
      * [72]Jonathan Corbet, Executive Editor
      * [73]Elizabeth O. Coolbaugh, Managing Editor
      * [74]Michael J. Hammel, Senior Editor
        
    May 10, 2001
    
                               [75]Click Here 
    
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    [78]Eklektix, Inc. Linux powered! Copyright Л 2001 [79]Eklektix, Inc.,
    all rights reserved
    Linux (R) is a registered trademark of Linus Torvalds
 
 References
 
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 URL: http://lwn.net/2001/0510   Sergey Lentsov   10 May 2001 17:11:06 
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