Acquisition of SCO UNIX
On August 2, 2000, following several months of negotiations, Santa Cruz Operation announced that it would sell its Server Software and Services Divisions, including UnixWare – its most technically advanced proprietary Unix operating systems for Intel commodity hardware – to Caldera Systems.[35][36] (The agreement was phrased in terms of Caldera Holding, Inc., a typical Newco in such transactions.[37]) The annual SCO Forum conference of developers and resellers at the University of California, Santa Cruz, held later that month, had its name shortened to just "Forum".
The deal was complex, involving cash, stock, and loans, and difficult to evaluate monetarily, but based on the price of Caldera Systems stock at the time it was worth around $110–114 million.[11][36] SCO was much the bigger company, with 900 employees to Caldera Systems' 120.[11] But SCO had been in distress; in part due to the advent of Linux, a series of previously good financial results had gone sour for the company as 1999 turned into 2000.[38] As Forbes magazine stated, "Questions remain about execution, but the deal is at least a temporary life preserver for SCO, whose flagship UnixWare server software was in danger of eventually becoming irrelevant in the face of Linux."
As Caldera Systems saw it, Unix and Linux were complementary rather than competitive technologies, especially in the sense that SCO Unix represented a good back-office and database solution while Linux specialized in networking.[8] The deal gave Caldera Systems access to partnerships with Compaq Computer and IBM, both of which resold UnixWare, and also meant Caldera Systems would become the world's largest vendor of Unix licenses.[11] SCO also had thousands of business applications running on it targeted to vertical markets.[8] In addition, Caldera Systems saw SCO's role as one of the OS companies involved in Project Monterey as a means to develop a 64-bit computing strategy.
But a primary reason for the acquisition was to get SCO's 15,000-strong reseller channel.[35] Caldera Systems had been emphasizing trying to get into much the same VAR channel business that SCO was in,[39] using the argument that resellers could find larger margins with free software than by selling Microsoft's Windows NT.[40] But it had been a difficult sell against SCO; even when Linux outperformed SCO Unix, the idea of switching vendors and support organizations made resellers reluctant to make the move.[39]
So combining these channels was seen as a solution to this problem.[39] As the president of iXorg, a reseller organization focused on SCO, stated, "The real value that Caldera will get from the deal is not the Unix name, not the [SCO] customer base, not even the technologies. It is the reseller channel."[11] Skeptics noted, however, that many of those listed resellers were probably not that active anymore, especially in light of SCO's recent struggles[35] (it had reported a $19 million quarterly loss a week before the acquisition announcement).[36] Traditional SCO users were leery of the move, but Love tried to reassure them that the SCO Unix operating systems would continue on: "Why would we buy it to destroy what we buy? That wouldn't make any sense."[41]
There were hurdles to be overcome, including a fair amount of enmity for SCO within the Linux community. A major question became whether Caldera Systems would make the SCO-acquired Unix source code open source. Ransom Love initially said, "While we're having to look carefully at the licensing, we're going to open up the [UnixWare] source as much as possible, and at least some of it will be under" the GNU Public Licence.[11] But there was pushback on the idea from the UnixWare staff in New Jersey, and in addition the license issues involved proved formidable. Love later said, "at first we wanted to open-source all of Unix's code, but we quickly found that even though we owned it, it was, and still is, full of other companies' copyrights. The challenge was that there were a lot of business entities that didn't want this to happen. Intel was the biggest opposition."
Instead, there was a focus on SCO's Linux Kernel Personality (LKP), a layer that conformed to the Linux Standard Base specification which would allow applications built for Linux to run on SCO's UnixWare. This was seen as both a way to capture more applications for Unix, and as a way to increase the performance of high-end applications. The latter factor was because SCO UnixWare had an advantage over Linux at the time in terms of support for 16- and 32-way symmetric multiprocessing, UnixWare NonStop Clusters, and some other high-end operating system capabilities. Indeed, one SCO product manager said that some Linux applications could run several times faster under UnixWare with LKP than they could under native Linux.[42]
The SCO acquisition was originally scheduled to close in October 2000,[36] but got delayed due to concerns from the Securities and Exchange Commission (SEC) regarding the details of the merger.[43] However, the two companies' support organizations did get combined during this time.[43] In addition, there was confusion among the SCO customer base about the fate of its other operating system, SCO OpenServer. So in February 2001, the deal was renegotiated to include OpenServer in what was sold to Caldera Systems, although a percentage of OpenServer revenue would still go back to SCO. The monetary terms of the deal were adjusted as well, with Caldera Systems paying SCO more cash than in the original agreement.[44] Analysts were skeptical that these multiple operating systems could be managed without considerable difficulties being encountered.[44]
Financial pressure on the company continued; for fiscal 2000, ending on October 31, Caldera Systems lost $39.2 million on revenue of $4.3 million.[45]
"Unifying Unix with Linux for Business"
The merger was originally being done under the name of the holding company Caldera, Inc.,[46] Then on March 26, 2001, during the CeBIT conference in Germany, Caldera Systems announced that it would be changing its name to Caldera International once the SCO acquisition was complete.[47] By this point, the length and difficulty of the acquisition process had alienated some longtime SCO customers and partners.[48]
The acquisition closed on May 7, 2001, and the new Caldera International name became effective.[49] The merged company had major offices in not just Utah, but also Santa Cruz, California, Murray Hill, New Jersey, and Watford, England, as well as smaller facilities in 16 additional countries.[25][4]
