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SCO Exec Says The Company May Revive Project Monterey

Aug 29, 2002 (08:08 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=6502895


Caldera International says it will change its name to the SCO Group, pending shareholder approval. The decision revives a computer industry brand name once left for dead and demonstrates the tough market facing software companies that have tried to earn a living from Linux.

Caldera, founded by a group of Novell alumni in the mid-'90s to sell tools and support for the Linux operating system, last year bought most of the products, staff, and intellectual property from the Santa Cruz Operation, a software developer that started in the late '70s, and realized moderate success in the '90s selling versions of Unix that run on Intel chips. Now, the new SCO is thinking about reviving an old SCO effort to develop a version of Unix for Intel's new 64-bit family of Itanium processors.

"We're certainly considering it," says senior VP Reg Broughton, who joined Caldera last year when it bought his software company, Acrylis. "We've got a lot of technology done from Project Monterey." In the late '90s, the Santa Cruz Operation began developing a version of Unix for Itanium in conjunction with IBM and Intel under the name Project Monterey. But the result--IBM's AIX 5L--runs only on IBM's Power architecture, not Itanium. "The project got shelved," Broughton says.

Market conditions could make it tough for SCO--on track for only about $60 million in revenue this year--to revive Monterey. IBM favors its AIX version of Unix for computers built with its Power RISC chip and Linux for machines based on Intel chips. Hewlett-Packard is pushing its HP-UX Unix variant on Itanium. And Microsoft is preparing to ship a version of its Windows server software that runs on Itanium. "It would be a large investment," Broughton admits.

Santa Cruz Operation, Caldera, and networking-software developer Novell have an intertwined history. In 1995, Novell sold UnixWare--a Unix-on-Intel variant developed at AT&T's Bell Labs--to Santa Cruz Operation, a software development house which had supplied the operating system for Apple Computer's Lisa in the '80s. Under Santa Cruz Operation, UnixWare (which is still run by companies such as the Nasdaq Stock Market and Lucent Technologies Inc.) and OpenServer, a Unix variant for smaller computers, achieved a measure of success.

McDonald's Corp. and Goodyear Tire & Rubber Co. are OpenServer customers. But Santa Cruz Operation wasn't able to compete with larger Unix-on-RISC vendors such as Sun Microsystems. Meanwhile, a group of Novell staffers funded by former CEO Ray Noorda founded Caldera in '94.

At a reseller conference in Las Vegas last week, Caldera said it would change its name to the SCO Group and release an update to UnixWare in December and to OpenServer early next year. A new version of the company's Linux distribution, SCO Linux, is due in November.

On Aug. 28, the SCO Group reported a third-quarter net loss of $4.5 million on sales of $15.4 million. Shares of the company closed Aug. 29 at $2.11, compared with a 52-week low of 60 cents. All of which has some analysts wondering why the company changed its name and whether it can find a niche.

"It really struck me as a bizarre announcement," says Gordon Haff, an analyst at technology research company Illuminata. "Red Hat is very clearly emerging as the winner--to the degree that there is a winner--on the Linux distribution front." Meanwhile, UnixWare and OpenServer are "a legacy business," he adds. "If you implicitly say, 'This is the future of our company' by changing the name back to SCO, it strikes me as a step backward. The industry has moved on."