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April 25, 2004

SCO and investor positions hardening

BayStar Capital is not ruling out possible legal action against SCO Group Inc to secure the return of a $20m investment, after it expressed concern over SCO's management.

By CBR Staff Writer

When asked if BayStar would turn to the courts a BayStar spokesperson told ComputerWire Friday the venture capitalist is looking to all necessary and potential options against SCO,

We are committed to taking all appropriate steps necessary for our investors, the spokesperson said, adding this the first time, out of more than 100 investments, that BayStar has actually sought its money back.

SCO revealed BayStar wanted a refund last week, and it seemed the companies are heading for a stand off after SCO on Friday said it had no intention of parting with BayStar’s cash (see separate story). SCO added it has no intention of altering its management, a condition also sought by BayStar in retaining the $20m.

BayStar’s investment in SCO has catapulted BayStar into the full glare of publicity, thanks to SCO’s Unix IP legal action against the open source industry and end-users. News emerged earlier that senior executives from Microsoft Corp executives approached BayStar, pointing out SCO as a potential investment target, raising the debate over Microsoft’s involvement as an attempt to kill Linux.

SCO has helped feed the frenzy of attention, as chief executive Darl McBride has traded contentious open letters with the open source community over his company’s actions and claimed IP.

According to BayStar, it is the inexperience of SCO’s management in fighting the case, rather than the weakness of SCO’s actions, and a determination to build a business based on Unix, which are troubling. BayStar is calling for SCO to bring in senior management experienced in IP litigation for a public company.

SCO should focus its resources on the IP it possesses, the litigation in 2005. It’s a question of focus on business that has potential for growth and return for shareholders, BayStar’s spokesperson said. We see value in the IP and the case brought by David Boies [of SCO’s legal counsel Boies, Schiller and Flexner]

Meanwhile, BayStar’s spokesperson said the company informed SCO of concerns both verbally and in writing on numerous occasions. This is not something that has been communicated recently, he said. SCO has said it is seeking clarification from BayStar over concerns.

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This article is based on material originally published by ComputerWire

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