Caldera International

Background and formation

Caldera, Inc., based in Utah, was founded in 1994 by Bryan Wayne Sparks and Ransom H. Love, receiving start-up funding from Ray Noorda's Canopy Group. Its main product was Caldera Network Desktop (CND), a Linux distribution mainly targeted at business customers and containing some proprietary additions. Caldera, Inc. later purchased the German LST Software GmbH and its LST Power Linux distribution, which was made the basis of their following product Caldera OpenLinux (COL).

Caldera, Inc. inherited a lawsuit against Microsoft when it purchased DR-DOS from Novell in 1996. This Caldera v. Microsoft action related to Caldera's claims of monopolization, illegal tying, exclusive dealing, and tortious interference by Microsoft.[2]

On September 2, 1998, Caldera, Inc. announced the creation of two Utah-based wholly owned subsidiaries, Caldera Systems, Inc. and Caldera Thin Clients, Inc., in order to split up tasks and directions.[3] Caldera Systems, whose actual incorporation date had been August 21, 1998,[4] took over the Linux business, including development, training, services, and support, while Caldera Thin Clients (which changed its name to Lineo the following year) took over the DOS and embedded business.[5] The shell company Caldera, Inc., remained responsible for the lawsuit only.

"Linux for Business"

Caldera Systems was headquartered in Orem, Utah, and was headed by co-founder Ransom Love as President and CEO.[5] Caldera Deutschland GmbH, based in Erlangen, Germany, served as their Linux development center.[6] Drew Spencer joined in 1999 and became the company's Chief Technology Officer.

The company targeted the Linux-based software business with its Linux distribution named Caldera OpenLinux, and the Caldera Systems business plan stressed the importance of corporate training, support, and services.[7] Towards this end they created a professional certification program for Linux as well as for the KDE desktop that the Caldera Systems distribution used.[8] In doing so they worked with the Linux Professional Institute in developing class materials and created a series of Authorized Linux Education Centers around the globe that would train successful students towards doing well in Linux Professional Institute Certification Programs.[9] Beginning courses trained on several difficult Linux distributions as well as Caldera OpenLinux, while more advanced courses focused on OpenLinux only[9] (the name OpenLinux tended to annoy other Linux distributions, suggesting as it did that the others were not open).

The early leader in the Linux as a business race was Red Hat Software, which attracted equity investments from several major technology companies in early 1999.[10] Red Hat also tended to get the most media attention. Besides Red Hat and Caldera, other well-known companies selling Linux distributions included SuSE, Turbolinux, and Mandrake Soft. But no company at the time had been successful in building a profitable business around open source software.[11]

Caldera Systems focused on a high-end Linux product and its Linux distribution became rich with features with bundled proprietary software. For instance, the company offered NetWare for Linux, which included a full-blown NetWare implementation from Novell.[12] They licensed Sun Microsystems's Wabi to allow people to run Windows applications under Linux.[13] Additionally, they shipped with Linux versions of WordPerfect from Corel as well as productivity applications from Applixware. Since many of their customers used a dual boot setup, Caldera shipped with PowerQuest's PartitionMagic to allow their customers to non-destructively repartition their hard disks.[14]

This approach led to a debate about the purity of Linux-based products. Red Hat CEO Bob Young said in 1999, "One where you might see a problem is Caldera, because they see part of their value added in proprietary tools they have licensed from third parties." In response, a Caldera Systems executive expressed the company's philosophy: "We have produced a product that combines the best of open-source and commercial packages; we are doing Linux for business. We do add to it commercial packages that allow business users to easily integrate it."[15]

Caldera OpenLinux was also available on a retail basis, in the form of a CD-ROM for installing Linux on an IBM PC compatible machine that sold for US$49.[16]

OpenLinux 2.2, released in April 1999, was seen as significantly improved from the previous year's 1.3 release, especially in terms of it having a fully graphical and easy-to-use installation feature.[17] Ease of installation was an important criteria in selecting a Linux distribution, and Caldera Deutschland had created this first fully graphical installer for Linux, called Lizard, starting in November 1998.[18] Several years later it was still receiving praise from reviewers. The installer could even be started from a Microsoft Windows partition.[17]

Industry writer Hal Plotkin praised Caldera as a product development company and noted that OpenLinux won several industry awards, including 1999 product of the year from Linux Journal.

Other products and projects

In addition to other people's applications, Caldera Systems created many Linux extensions to fill voids where no other commercial company was.

Caldera Systems created a full-featured GUI system administration tool called Caldera Open Administration System (COAS) that was deployed during 1999. The tool was a unified, easy to use administration tool with a modular design and goals of scalability and broad scope applicability, and was expressly designed to be usable on other Linux distributions in addition to Caldera Systems'.[19] Following that, Caldera Systems sponsored the development of browser-based Unix system administration via the webmin project between 1999 and 2001.[20] It became the first Linux distribution to include Webmin as the standard tool for system administration.[21]

Caldera Systems was a leader in the adoption of the Java language and software platform on Linux. The Blackdown Java project, which first produced working Java ports for Linux systems, was featured on Caldera OpenLinux.[22] In 2000, Caldera Systems was one of the companies elected to the inaugural JCP Executive Committee for Java SE/EE, which guided the evolution of Java language and software platform through the Java Community Process.[23] Caldera Systems' role on the Executive Committee included representing the Linux and open source communities.[22]

The company was re-elected to its seat on the Executive Committee after it became Caldera International, and represented Java usage on SCO Unix platforms as well.[24] Work to improve just-in-time compilation under the Sun "Classic JVM" for SCO Unix platforms that begun under SCO was completed with Caldera International.[25] Caldera Systems was also involved in several Java Specification Requests,[24] including being the specification lead for JSR 140, Service Location Protocol API for Java,[26] and participating in the JSR 48 WBEM Services Specification.[24]

Investments and IPO

Caldera Systems had not been profitable; for the company's 1998 fiscal year, ending on October 31, it had a loss of $7.9 million on revenue of $1.05 million, and for its 1999 fiscal year, it had a loss of $9.3 million on revenue of $3.05 million.[27] However, the industry saw promise in Linux as a solution for businesses, and in the latter half of 1999 a "Linux hysteria" had erupted in the stock market, with first Red Hat in August 1999 and then Cobalt Networks and VA Linux in November and December 1999 having experienced huge jumps in value during their first day each of trading.

On January 10, 2000, three things happened, all of which were coincidental.[28] A settlement to the Caldera v. Microsoft suit over DR-DOS was announced, with Microsoft paying former parent company Caldera, Inc. an amount estimated at $275 million (which turned out to be $280 million).[29] Caldera Systems received a $30 million private equity investment from a group of companies that included Sun Microsystems, Novell, Citrix, Santa Cruz Operation, Chicago Venture Partners, and Egan-Managed Capital,[30] with the goal to "fund operations and accelerate the growth and acceptance of Linux."[28] Also, Caldera Systems announced that it would be filing to have an initial public offering. Ransom Love said that the Microsoft settlement would not benefit Caldera Systems other than that Caldera, Inc. would relinquish the name "Caldera",[28] which would address existing industry confusion between the two. Reports at the time also indicated that the settlement would not directly benefit Caldera Systems,[31] but that Caldera Systems could get an intangible benefit from a name association with a company that had bested an industry giant.[32] Love also said that the timing between the funding round, work for which had begun six months earlier, and the IPO announcement was "unfortunate, and completely coincidental".[28]

Caldera Systems reincorporated in Delaware on March 6, 2000.[4] By this point it was well positioned in some respects, such as having a strong relationship with Sun and receiving good product reviews within the industry.[27] But it suffered from a lack of public awareness; as IDC analyst Dan Kusnetzky said, "They have a wonderful demo, and the product looks very good. But if you asked people on the street about Caldera they would probably think you are talking about a volcano in Hawaii."[27]

The company then staged an IPO of its common stock, with the symbol CALD.[33] On the first day of trading, March 21, 2000, Caldera Systems' shares doubled in value, going from an initial price of $14 to close at $29 7/16,[34] with heavy trading been seen and an intra-day high of $33.[33] The IPO raised $70 million for the company and gave it a market capitalization of $1.1 billion.[34]

While the launch was successful on its own terms, analysts saw signs that the Linux mania was finally cooling, abetted by Red Hat and VA Linux having seen their values steadily decrease since their spectacular starts.[34] So, while some observers viewed the IPO as a success, others viewed it as a disappointment.[33] Red Hat continued to dominate in North America, with an over 50 percent share of the Linux market.

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] Thus included in late May 2001, Caldera International, with investments of Fujitsu and Hitachi, opening the Caldera K.K. (カルデラ株式会社) subsidiary, directed by Makoto Asoh, who had previously run Nihon SCO, in Tokyo, Japan,[50] which had been one of two SCO subsidiaries in that country.[51] Overall, SCO had an infrastructure presence of some kind in 80 countries, whereas Caldera Systems had always been largely domestic, thus in part the rationale for the name change.[8]

"Unifying Unix with Linux for Business" became the company's new marketing slogan.[49][52] In light of that, the company began the Caldera Developer Network, which was intended to give developers of all kinds "early access to UNIX and Linux technologies, allowing them to develop on UNIX, on Linux or on a combined UNIX and Linux platform."[52]

Caldera International's initial release of UnixWare was renamed Open UNIX 8. This release was what would have been UnixWare 7.1.2.[53] While it may have been done to make the branding more consistent with OpenLinux and Open Server, it confused people as well as build and installation scripts that tested for system name. Later, the newly renamed SCO Group reverted to the previous UnixWare brand and version release numbering, releasing UnixWare 7.1.3.[54]

In terms of the question of making some of UnixWare open source, in August 2001 Caldera International did announce that it was placing the code for the regular expression parser and the [[grep| from 2001-03-31)