Is Caldera moving away from Linux?
When Linux vendor Caldera announced it would change its name to SCO Group, it prompted doubts that the company might be shifting its focus from Linux to Unix.
The company owns several key versions of Unix and makes the majority of its profits from commercial Unix versions, instead of the opensource Linux operating system. The change of name, to one of the best known commercial Unix brands, came weeks after the appointment of a new chief executive, Darl McBride, from outside the opensource community.
However, Caldera is still a member of the UnitedLinux effort to provide a common Linux platform, and has been at pains, since the name change, to emphasise the continued role of Linux in its plans.
Just days before the name change was announced, Tech Update sat down with Darl McBride at the LinuxWorld event. He agreed that Unix is the strongest financial part of Caldera's business, but still had plenty to say about Linux.
What's your main focus as the new CEO for Caldera?
The first four weeks on the job I've spent a lot of time looking for value points, leverage points, if you will, in terms of "what do we do with this company." I just sent out a letter to shareholders a couple of days ago -- I won't bore you with all the details -- but there are a couple of interesting things in there that I found out about Caldera that I didn't know before. One, the intellectual properties that we hold -- we own SVRx, UnixWare, SCO Unix -- in terms of the Unix timeline, the thread that runs through the middle of these is really SVRx. All of the subsequent Unix licensing that happened broke off from that. We own all that intellectual property and have relationships with a lot of vendors. If people want to come and see the original HP-UX source code, they come to us. We get several dozen requests a month just to come in and see AIX or HP-UX code base. And C++ programming languages, we own those, have licensed them out multiple times, obviously. We have a lot of royalties coming to us from C++. It was interesting to see the depth of Caldera's intellectual capital.
In terms of dealing with a company that has Unix and Linux in part of its portfolio, we're a lot more substantial than your run-of-the-mill, startup distribution company trying to figure out how to make it work with Linux. We've been around a long time. And the interesting thing is that our revenues have really stabilised -- in fact, this last quarter we saw revenues go up for the first time in several quarters. We're in a much better situation than a lot of people would seem to believe.
Just a few years ago Caldera's Linux distributions were a major part of its product lineup. These days Caldera's main push is Unix. What happened to Linux? The problem was, they were spending four marketing dollars to get one revenue dollar. No matter how much you raise on your IPO, you can't do that forever. I think acquiring SCO was a really smart thing. There was a view that the SCO business was going to go away, but actually it's been the opposite. The constricting of the economy has led to the effect that companies are not immediately swapping out core platform products, especially when they work as reliably as an SCO product does. We just signed a big licensing deal with McDonald's last week, BMW -- these guys are coming back in droves right now, signing up to continue on with the platform. A year ago the strategy was "Let's move all of our SCO customers onto Linux." We have a much different view of the world this year. We have an operating systems group here, and we have OpenServer, UnixWare, and UnitedLinux, and we're going to let customers choose whatever they want. Each OS is tuned for a different market--UnixWare is great for telcos, for example, and we think UnitedLinux is going to be better from a back-office point of view. At the point of sale with a lot of apps surrounding it, that's where SCO is doing well. What we want to do on top of that is add a set of open-source applications that wrap around that installed base, and try to make money on doing some of the higher-level services and apps as well. In a nutshell, that's where we're trying to go with the company. So you're hoping that UnitedLinux will increase your Linux business? We believe there's a big opportunity there. A big portion of our revenue comes through the resale channel, and [this kind of] product doesn't do well in a channel, obviously. When we start talking about a product that has a price tag on it like UnitedLinux, we suddenly have a model to go to market with. It's not that these guys don't like Linux per se, it's just "How do I make money on it?" Beyond the typical service story, they need to have a box that they can get some margin on, and that's what we'll be looking at. With our 16,000 resellers--who, by the way, are very loyal--we believe that when this product is ready for primetime, we're going to have a nice run with it at the operating system level, and then on top of that we'll have the value-added services and applications. What's your target audience for UnitedLinux? We're going to target our version where are strengths are, which is in the SMB marketplace. Our resellers sell to hundreds of thousands or millions of SMB customers, and we have over 1,500 replicated site/branch office customers that we sell to. Those will be the two markets that we go after. Will Caldera's version of UnitedLinux show up on store shelves? No, we'll just push it through our distribution channel. Mostly it's going to be a VAR-type of product or it'll be sold into one of our big corporate accounts like McDonald's. NASDAQ, for example, runs all of the trading machines in their brokerages on OpenServer. We'll go into the places where we have a strong presence today. A lot of times when you go into a branch office setting, you'll see four or five servers in there and maybe two or three of those are SCO. We want to target the other two or three. And then we want to provide manageability. We have the Volution management solution that can tie it back up to Unicenter or Tivoli. That's how we think we win, going forward. What kind of value add will Caldera offer for UnitedLinux? What we'll do is tune each of the products. For example, SuSE would probably go in a more high-end, enterprise, clustered server environment, and they might wrap a set of services, products, and positioning/marketing into that marketplace. We'd come from more of a replicated site/branch office/SMB point of view, and may add some more services on top of that. But we're not going to take the kernel and play with that, we're all going to use the same distribution. It's just a question of what we wrap around it. In response to a question about UnitedLinux at a recent Dell/Red Hat briefing, Matthew Szulik quipped, "What is UnitedLinux?" Is there animosity between UnitedLinux and Red Hat? Red Hat was invited to join UnitedLinux, and they chose not to come in. I think their attitude toward us is about like it is with other folks. They're fairly proud of themselves right now, and for good reason. They've done a good job. I'll definitely give them that. But I think there are a lot of vendors and customers that are very nervous about creating "Redmond East," if you will, in terms of the stranglehold [Red Hat] could have on this segment of the industry. Quite honestly, that's why we see a lot of the interest and demand coming from these vendors, who are saying, "We need to have more than one strong player there." The IBMs, HPs, and Dells of the world are very interested in having a multiple-source solution there.