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Umm, About That $100m Microsoft Funneled to SCO

Umm, About That $100m Microsoft Funneled to SCO

A piece of juicy compromising e-mail written by a SCO consultant to SCOsource VP Chris Sontag and SCO CFO Bob Bench last October suggesting that Microsoft had quietly funneled $86 million to SCO and that it was good for at least $106 million before tapping all possibilities happened to turn up on open source philosopher Eric Raymond's web site Thursday.

Eric made it part of his Microsoft-embarrassing internal documents collection and dubbed it Halloween X. (See

He says he got it from an "anonymous whistleblower inside SCO," which is odd because, given the timing and other little niceties, one would be tempted to think that it was a bit of SCO discovery that somehow got loose from IBM. Oh, yeah, Eric is a sometime consultant for IBM and his anti-SCO credentials are impeccable.

Right at the top of the kinda disjointed e-mail the consultant, one Mike Anderer from the M&A side of an outfit called S2 Strategic Consulting, clearly refers to Baystar Capital, the VC that was part of a $50 million investment in SCO last year, as a "Microsoft referral."

SCO admits the e-mail is genuine but claims it was misguided. SCO spokesman Blake Stowell read a statement that said, "We believe the e-mail was simply a misunderstanding of the facts by an outside consultant who was working on a specific, unrelated project to the Baystar transaction and he was told at the time of his misunderstanding. Contrary to the speculation of Eric Raymond, Microsoft did not orchestrate or participate in the Baystar investment."

Evidently Microsoft did introduce SCO and Baystar, but the millions Baystar, an obscure house, put in was Baystar's, not Microsoft's. Of course, Microsoft was doubtless grateful, and gratitude can sometimes be profitable.

IBM has already subpoenaed Baystar, along with a couple of other SCO investors, so it should be interesting to see what its fishing expedition turns up.

The other investor in the $50 million round was the Royal Bank of Canada. Microsoft is supposed to have paid SCO $10 or $11 million for some Unix IP.

The rest of Anderer's e-mail says:

"I realize the last negotiations are not as much fun, but Microsoft will have brough [sic] in $86 million for us including Baystar. The next deal we should be able to get from $16-20, but it will be brutial [sic] as it is for go to makerket [sic] work and some licences [sic]. I know we can do this, if everyone stays on board and still wants to do a deal. I just want to get this deal and move away from corp dev and out into the marketing and field dollars.

"...In this market we can get $3-5 million in incremental deals and not have to go through the gauntlet which will get tougher next week with the SR VPs.

"...Microsoft also indicated there was a lot more money out there and they would clearly rather use Baystar 'like' entities to help us get signifigantly [sic] more money if we want to grow further or do acquisitions.

"This Microsoft deal is the Ante to the poker game...We should get this done and go after several $2-3 Million deals from the expense side of their company. So their revenue plan for the future is to hit Microsoft up for money, then hit them up for more money. The [sic] will help us a lot and if we execute we could exit and Unix componients [sic] we have build [sic] potentially back to Microsoft or MCS.

"I think they are on track and may not be able to push much more this round, but there are other ways to get money from them, their partners, investment bank referrals, etc.

"Do kepp [sic] in mind that they have brough [sic] us between $82 million and $86 million if this deal is between $4million per quarter where Rich [Eric think he means Rich Emerson, Microsoft's senior VP of corporate development and strategy] is at, or it turns into %5 [sic] million wjich [sic] is the lowest number Chris had interest in.

"There will be more, lo[a]ns, partnerships, etc. but we need to just get this one done. It is too high profile, it is also critical, but they are not the people to pitch.  We should get what we can from them ad [sic] then work the other and larger areas of the company and groups where they have real budget and need for our help."

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at) or paperboy(at), and by phone at 516 759-7025. Twitter: @MaureenOGara

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