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October 9, 2006

Microsoft guaranteed SCO investor?

Posted by David Hunter at 12:09 PM ET.

In the “dirty tricks” or at least the “odd potential use of cash” department, Eric Bangeman reports at Ars Technica on some revelations in the SCO lawsuit against IBM:

In the ongoing saga of SCO v. IBM, one peripheral question has been the extent of Microsoft’s financial support for SCO. Groklaw has dug up an interesting bit of data in the case, namely that Microsoft supposedly promised venture capital firm BayStar that they would guarantee their multimillion-dollar investment in SCO.

Buried in IBM’s recent motion for summary judgment against SCO is a Declaration from BayStar general partner Larry Goldfarb. Near the beginning of the long-running legal soap opera, BayStar invested $50 million in SCO. In exchange for their investment, BayStar received 20,000 shares of preferred stock in SCO.

In his declaration, Goldfarb testifies that former Microsoft senior VP for corporate development and strategy Richard Emerson discussed “a variety of investment structures wherein Microsoft would ‘backstop,’ or guarantee in some way, BayStar’s investment.” Goldfarb then said that after BayStar committed the $50 million to SCO’s cause, Microsoft “stopped returning my phone calls and e-mails, and to the best of my knowledge, Mr. Emerson was fired from Microsoft.”

Microsoft stood to gain in the event of a SCO victory, as Linux would become a much-less-attractive option for companies looking to wean themselves from UNIX or even Microsoft’s own commercial offerings. In March 2004, an e-mail surfaced that indicated Microsoft had played a part in hooking BayStar up with SCO. At the time, both BayStar and Microsoft denied that the Redmond, WA-based software giant had any financial involvement in the deal, although it did purchase a UNIX license from SCO in 2003, ultimately spending $16.6 million on licensing fees.

Many more details by following the link, but SCO and its laughable lawsuit continue to be a vast morass that soils everyone who gets near it.

Update: Microsoft denies a connection.

Filed under Coopetition, Financial, General Business, IBM, Linux, Microsoft, Open Source, Public Relations, SCO

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