Is Microsoft Behind SCO's $50 Million Cash Infusion?
October 17, 2003
By Peter Galli
Hot on the heels of The SCO Group's announcement that BayStar Capital has
invested $50 million in the company, questions are being raised about whether
Microsoft Corp. may have had a role in that investment.
As an investment firm, BayStar leads, creates and participates in a number of
PIPEs (Private Investments in Public Equity). Many of these deals involve
investment money from other companies, including Microsoft, sources said.
But Bob McGrath, a spokesman for BayStar, disputed that claim, telling eWeek
on Friday that BayStar had examined its records and could find no
side-by-side PIPE or other investments that it had participated in along with
Microsoft.
"Microsoft is also not an investor in this particular transaction. BayStar
either leads, creates or is a major participant in private investments in
public companies, also known as PIPEs, and has made 44 such investments so
far this year.
"They invest their own capital as well as put deals together that involve
other investors but, again, this specific deal did not include Microsoft," he
said.
McGrath also pointed eWeek to a BayStar White Paper on PIPEs published in
October 2002, which lists both Microsoft and Vulcan Ventures, Inc., the
investment firm of Microsoft co-founder Paul G. Allen, as being among the top
ten PIPE investors since 1995.
That, McGrath said, could explain why people were assuming that Microsoft was
an investment partner alongside BayStar, but he was unable to say if Vulcan
was such a partner.
SCO spokesman Blake Stowell echoed those sentiments, telling eWeek on Friday
that Microsoft was not an investor in SCO through this deal. "There are only
two investors in this deal: BayStar Capital and the Royal Bank of Canada.
"I think people will try and come to the conclusion that Microsoft is somehow
involved in this deal, but I can tell you with great certainty that Microsoft
was not involved with this investment," he said.
But people in the open-source community are far from convinced. They cite the
myriad of investment holding and other companies that firms like Microsoft
can hide behind when making investments.
"There are many ways to hide the money trail. Something still smells funny. An
angel has landed for SCO but who's string is attached?," one questioned.
Others cite Microsoft's move earlier this year to license the Unix source code
and patent from SCO in a deal believed to be worth many millions of dollars
as evidence of the Redmond software titan's desire to fund SCO's ongoing
legal actions against IBM, SGI and corporate Linux users. Microsoft has
repeatedly denied those claims, saying it was simply respecting SCO's
intellectual property.
Another open source player, who asked not to be identified, told eWeek that
the $50 million investment into SCO was surprising to him as "SCO is not a
good growth company and is in fact on life-support. A solid company that's
been in business as long as SCO has should be making it's money from product/
services and not donations and lawsuits.
"I had to look at BayStar to see why they would do this and the only thing
that makes sense is the PIPE program. Someone has a vested interest in seeing
SCO continue and lo and behold, there is Microsoft listed as a BayStar PIPE
customer," he said.
But BayStar's McGrath again stressed that Microsoft was not an investor in
this deal. But he did point out that the fact that Microsoft had done
business with SCO was seen as a positive when BayStar was looking at SCO as a
potential good business and good investment.
Copyright (c) 2003 Ziff Davis Media Inc. All Rights Reserved.
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