Caldera will now be able to offer its Open Internet Platform, combining Linux and Unix server software and services.
It's the beginning of a new era and the end of an old one. Last night, Caldera, a leading Linux distributor, bought the Server (Unix) and Professional Services Division of Santa Cruz Operations (SCO), the long-standing leader of Intel Unix.
With this single move, Linux and Unix are unified for the first time under one company. The enterprise operating system world will never be the same.
The two companies have been close to a deal for weeks. In the end, Caldera gained not only the Unix-on-Intel Server Software Division -- which consists of UnixWare and OpenServer along with SCO's existing reseller partnerships and contracts in SCO's traditional global markets of small and midsize businesses, retail, telecommunications and government -- but also the Professional Services division, as well.
This Professional Services division provides consulting, support and installation/integration support to both direct customers and SCO's partners. This division, under Jim Wilt, current president of the SCO Professional Services division, will operate as a separate business unit of Caldera.
As for joining together time-tested Unix and low-cost, open-source Linux, Caldera states that it offer the industry's first comprehensive Open Internet Platform (OIP) combining Linux and Unix server solutions and services globally.
Specifically, that will include Caldera's Linux line and SCO's OpenServer and UnixWare lines. The combined OIP product line will be unveiled at SCO's premier partner show, Forum2000, on August 23 and made available through SCO and Caldera's existing 15,000 worldwide partners.
The fine print
Caldera Systems is forming a new holding company, Caldera, to acquire the two divisions. This deal includes those division's employees, products and channel resources.
In the deal, SCO will receive 28 percent of Caldera. This is estimated to be an aggregate of approximately 17.54 million shares of Caldera stock (including approximately 2 million SCO options shares reserved for SCO employees joining Caldera), and US$7 million in cash. Simultaneously, Ray Noorda's venture capital firm, The Canopy Group, Caldera Systems' major stockholder, has agreed to loan US$18 million to SCO. Presuming that Caldera's stock is valued at US$5.00 a share -- the average price of Caldera Systems and SCO stock before the market opens on August 2 -- the deal is worth approximately US$84 million in stock for a total, not counting the loan, of US$91 million.
SCO also will retain its highly valued Tarantella, a popular application service provider (ASP) division, and the SCO OpenServer revenue stream and intellectual properties.
In the last quarter, SCO OpenServer revenue amounted to US$11.1 million. After expenses, the net proceeds to SCO will be approximately 55 percent of future SCO OpenServer revenues. The investment banks of Chase H&Q for SCO and Broadview for Caldera Systems helped arrange the deal.
Both firms' boards of directors have unanimously approved the acquisition. The final decision is subject to the approval of Caldera Systems and SCO's stockholders. If all goes well, the deal should close in October 2000.
Caldera will be headquartered in Orem, Utah. Following the acquisition, Ransom Love, current president and CEO of Caldera Systems, will become CEO of Caldera; and David McCrabb, current president of the SCO Server Software Division, will become president and COO of Caldera. Finally, Doug Michels, president and CEO of SCO will become a member of Caldera's board of directors.
A view from the top
Leadership at both companies is happy about the deal. Love described the deal as an "industry-changing event that puts Caldera front and centre as the answer to the enterprise question."
For those who might worry about what this means for their existing SCO operating systems, he states that "Caldera is fully committed to supporting and servicing the SCO OpenServer and UnixWare communities."
David McCrabb elaborates on Love's statements saying that "Caldera will incorporate a worldwide network of sales and support offices, a strong commercial Unix system business and a rapidly growing open-source company. This combination will be a force to contend with in the worldwide market for Internet solutions on high volume platforms."
As for what remains of SCO, Tarantella, Michels believes that, "this transaction enables us to invest in the exciting growth opportunities ... by the continued attractiveness of thin-client computing and by the accelerating adoption of the ASP" model.
The reaction
Some are welcoming the change with open arms. Many believe that uniting Unix with Linux can only strengthen Linux's rising tide. According to IDC, Linux has 1.4 million server licenses, far more than all Unixes put together, but SCO's servers are located in the core of many older businesses. While Linux's strength is on the Internet, SCO still runs many small to midsize businesses, governmental departments and vertical markets.
From a Caldera supporter's viewpoint, Caldera gets a strong foothold in traditional brick-and-mortar businesses while maintaining the place in the Linux e-commerce and Internet strongholds. In addition, Caldera gets access to an outstanding, albeit somewhat ragged after the difficult ties of the last year, reseller channel.
Some people, including one senior executive at a disenchanted SCO reseller, however, don't think Caldera will be getting much of a deal. He says that, "Anyone who has attended the last few SCO Forums can tell you that the SCO channel has just about disappeared. The combination of competition from NT, the attempt to force Open Server customers to convert to UnixWare and direct selling by SCO has just about killed off every VAR and integrator."
Others--such as David Gloria, SCO Premier Reseller with Computer Integrators and president of Ixorg, an organisation of SCO resellers--are more optimistic. Gloria believes "that the real value that Caldera will get from the deal is not the Unix name, not the customer base, not even the technologies. It is the Reseller Channel."
At this early stage, Caldera certainly shows every sign of supporting the channel. Caldera Systems will join SCO in hosting Forum2000, SCO's premier partnership event starting on August 20 at the University of California. The company also plans to unveil its updated product offering at the show.
Chris Clabaugh, Allegix's CEO, agrees that the signs look good, "I view the [proposed] SCO/Caldera mix to be a good thing for customers like us." He believes that because the "consolidation of operating-system platforms choices will mean simpler product choices for both customers and channel partners." Still, he thinks that the deal also needs to result in "the combination of SVR 3/4/5 enterprise features with Linux" to be a real success.
Red Hat CEO Matthew Szulik would agree with that, although in a harsher manner. "This validates what we and the IDC numbers have been saying all along about the death of the proprietary Unix market. As advocates of open source, we look forward to Caldera's support of open sourcing SCO's proprietary Unix technology to the entire open-source community."
Still, Caldera's path isn't one that Red Hat would choose. Szulik goes on to say that, "Red Hat has made nine acquisitions in nine months -- nine acquisitions that emphasise our focus on new and emerging markets. We believe that our focus on these markets, rather than the rehabilitation of old markets, is what will help Red Hat continue its role as a leading innovator in the open-source technology industry."
The lines are drawn. Only time, and the marketplace, will tell whether the marriage of Unix and Linux will be a happy one.
