Executive Q&A: SCO's Darl McBride

The top dog at SCO outlines how the legal battles are going and where he sees SCO rebounding.

August 5, 2004

9 Min Read
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Darl McBride is sitting at a conference table, flipping through a 12-page magazine advertisement put together by Linux upstart Net Integration Technologies. Written and designed to look like a child's reading primer, the ad is making him laugh at the clever poke at Microsoft CEO Bill Gates. It gets the president and CEO started on his complex legal battles over intellectual property with IBM.

"I actually had this idea to tell the IBM legal story through a children's book, you know, reduce the thousands and thousands of legal pages down to a fable in a children's book," he says, waving the insert from Net Integration Technologies. "Then it would have real meaning."

Since launching the lawsuit against IBM a year-and-a-half ago, McBride says he feels as though he has lived through some child's tale of adventure and imagination. The high point for him in this fabled tale? Coming back from what he says would have been sure death in just a few quarters.

"We got taken for a ride by a partner (IBM) out into the desert, pushed out of the car, shot four times and left for dead," McBride says. "The good news is that we climbed back into townmake that crawled back into town, went to the hospital, got fixed up, recuperated, and we're alive. That's the good news. And we're back now getting justice in the situation."

Put another way, McBride describes his current situation as the halftime of a football game, one that bruised up his side pretty badly despite the hits that it delivered. It is important to note that he is one of only a few people at SCO focused on legal wars; the overwhelming majority are focused on getting the company's core Unix business back on track. But the company is struggling. Sales for the most recent quarter were off by more than half. Its stock, too, is off more than 75 percent from its 52-week high.Many are wondering if SCO's moment in the spotlight has come and gone. To keep up, the company has made some tough decisions. One led to the combining of the end-user and dedicated-channel sales teams. That resulted in lower channel sales as a percent of overall revenue, although it did improve the company's coordination in the field. And the company's overall partner head count, at 1,000 or so, is down, though many who drifted away were legacy Caldera partners more interested in pursuing Linux than SCO Server or UnixWare, SCO's other flagship product.

In a one-on-one interview at SCO's headquarters in Lindon, Utah, with VARBusiness senior executive editor T.C. Doyle, McBride outlines how the legal battles are going and where he sees SCO rebounding.

VB: So, how's life?

McBride: Well, we're in the middle of the hurricane.

VB: You feel like that?McBride: There's no doubt that it's a crazy environment, but we feel very good about where we are. I'd say we are halfway through this. We launched this thing in March of last year, and we're set to go to trial Nov. 1 of next year. We're roughly at halftime now. Appropriately so, it's a little bit quiet now. When we come back out, we look forward to the actions that will be taken in the courtroom, where the game's going to be won.

VB: Halftime"the weather can change. People come and go from the stadium. Somebody you thought could be patched up and ready to take the field again might not be ready, etc. How will the landscape change after halftime? The economy, maybe?

McBride: Several things, as we look at coming back out on the field: The net of the filings we are making and the hearings we are going through, we believe, is that the truth is going to come out with respect to the claims that we have been making. We look forward to getting justice through the court system. I guess if you want to talk about changes from last year to where we are now, I believe that just on the courtroom [action] that [attorney David] Boies is going to play a prominent role in the second half.

VB: So if it's halftime, what's the score out there?

McBride: Depends on who you're asking, right? When you're inside here and looking up at the board and talking to the legal guys, you figure, "Man, we're in great shape." But if you go out to one of the Internet chat boards, according to them we haven't put any points on the board yet. That's the good news about the courtroom: It is a zero sum game. You get to the end and there are winners and losers. I think in the first half, there was a lot of yelling and screaming about what the score was. At this point, we're just ready to get to the end of the game and get a jury conclusion. We feel very strongly about what that will be, but at the end of the day, you know O.J. is walking around free today, so we've got to factor that inFrom where we sit right now, regardless of what the score currently is, we like where we are going with respect to the end of the game.VB: Any regrets about going after IBM? Would you have done anything differently?

McBride: Well, I think it has been a pretty action-packed year. I wouldn't go back and say what moves we would have done differently. We believe that it is now Boies' turn to get in and finish this thing off. Now, did we expect this to create this much clamor, this much commotion? That wasn't our expectation going in. But that's where we are. I think the important thing is for everyone to step back and ask the question, "What if SCO is right?" It's pretty easy to read a bunch of things from people coming out against us. But if you go back and ponder for a moment what if SCO is right and what are the implications to that, [we hope people will see things differently]. Our mantra around here is SCO just wants its business back. We feel we had a great business back in the 1980s and 1990s, and we feel like that business was improperly taken from us, and we are in the process of restoring it. We look forward to restoring that business on both the IP front and in the marketplace.

VB: To those who say, "SCO, your business wasn't taken from you, you mismanaged it. You got all excited about a lawsuit, but if you just stuck to your knitting, you'd be in better shape." What's your answer to that?

McBride: When we filed the lawsuit, a lot of people came out and said SCO was going out of business and so they filed the lawsuit. They were right. The bottom line was that SCO had been on a steady decline and was just a few quarters away from not being around. And this comes back to the question of what if SCO is right"and we firmly believe we are. We believe the core issue is, how do we restore this business? A year ago, we had a number of legal theories that we put in the form of a lawsuit. Now, a year later, through a lot of discovery, we have been able to validate a lot of those theories through evidence. We look forward to getting that evidence in front of a jury. And that's where all this will come out.

VB: Other CEOs, whether they are running applications companies, tools companies, database companies"are all starting to say, "Well, maybe intellectual property is going to be a hell of a lot more important." If you win, does this have a stifling effect on the open-source software movement? Does it give an edge to every other CEO who has intellectual-proprietary software, and is concerned about an open-source movement parked next to him blasting away at his base?McBride: I think it comes back to property rights. The overarching question to all of this is, where is software going in five years from now? Is it along the lines of the FSF Charter, which is all free, or is the $200 billion-plus software market growing and thriving? If you talk to Oracle, Microsoft or anybody who has a booming software business, I believe they probably hope that we are right in this fight. So, I think the question if software is going to be free or not will actually come back as a positive. Think about the glass half-empty, glass half-full scenario. If SCO's right, then that reinforces property rights and people can make money. I would argue that if we don't win this, it will be a bad day for the world of software developers.

VB: You make the credible case that this is the plan of attack: "Put it out in the courts; we think we are right; we'll get our justice that way." But what happens if this thing takes what many expect to be a prolonged period of time? And how can you be sure that SCO does not wither before you get your justice in the end?

McBride: Fair question. The answer to that is by innovating on our core Unix products. If you look at the announcements we have made over the past month, we have moved UnixWare and OpenServer down the field. [By press time] we released SCO OfficeServer. We've got a small foot product, which is an embedded point-of-sale device-type management OS, which we are excited about. And we have a bunch more in the labs that we are cooking up. So, we're not just sitting back saying, "Let's wait until the courtroom victory." We're aggressively and actively pursuing our innovation plans around our core Unix business.

Now, we're at a severe disadvantage"being a platform company and not mentioned in the top two platforms that people want to go to. So, what it means in the short term, we think we have an opportunity, a great opportunity, to go out and service the 2 million-plus server-installed base that we have right now. And we'll have, maybe, a little bit of upside with new customers. But until we have that courtroom win, I think it's going to be hard to go out and legitimately talk about a huge growth story around Unix because, let's face it, Linux and UnixWare are competing for the same customer. And the mindshare in the marketplace right now is clearly around Linux.

VB: When you look back over the year, what are the high points for you?McBride: Well, the high point is that we are climbing back in business. The high point is we got taken for a ride, recuperated and we're alive. That's the good news. And we're back now getting justice in the situation we are talking about. The downside is that it's a pretty brutal environment. There's a lot of people who don't want to see us win.

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