Microsoft Dragged Into IBM SCO Legal Tussle

A recent court filing by IBM  seems to point an accusing finger at Microsoft as the puppetmaster behind the long-running lawsuit between IBM and SCO, but the connection is tenuous at best.

BayStar, an investment firm, stepped up to provide SCO with $50 million in private investment in 2003.

However, one year later BayStar recalled $20 million of that, feeling SCO had squandered the money on pointless legal wrangling and wrecked its reputation and ability to sell products.

In a declaration filed last week with the U.S. District Court for the District of Utah, BayStar executive Larry Goldfarb said that former Microsoft senior VP for corporate development and strategy Richard Emerson discussed “a variety of investment structures wherein Microsoft would ‘backstop,’ or guarantee in some way, BayStar’s investment.”

After BayStar committed the $50 million to SCO’s cause, Microsoft  “stopped returning my phone calls and e-mails, and to the best of my knowledge, Mr. Emerson was fired from Microsoft.”

Emerson, a former managing director for Lazard Freres, joined Microsoft in 2000 and left in September 2003 “to spend more time with his family,” according to a Microsoft spokesperson at the time.

Microsoft, naturally, denies any connection to BayStar. “Microsoft has no financial relationship with BayStar and never agreed to guarantee any of BayStar’s $50 million investment in SCO. The BayStar declaration confirms that no guarantee was ever provided,” Microsoft said in a statement to

Microsoft does have a deal with SCO for licensing rights to ensure IT interoperability for UNIX migration technology, currently in use in Microsoft utilities for UNIX-based applications.

The claims surfaced on the Groklaw Web site, which covers legal happenings in the tech sector.

The article focuses mostly on the IBM/SCO lawsuit, but quickly made the rounds to open source advocacy sites like Slashdot. Open source advocates, who have no love for Microsoft, were quickly flapping their arms hard enough to fly that this was proof of Microsoft attempting to sabotage the community.

But at this point, it’s just one man’s word of a conversation with one former Microsoft executive and no paper trail, points out Rob Enderle, principle analyst with The Enderle Group.

“Bay very well may have wanted Microsoft’s business, but whatever that belief was, nothing ever resulted. So you don’t know what was wishful thinking or not. We’re hinging off one person’s conversation. You’d think for a $50 million commitment there would be something on paper,” he said.

Enderle doesn’t think Goldfarb is lying, just that any conversation between him and Emerson probably never went beyond that.

“There may have been a conversation between the two and Emerson went to management, who decided they didn’t want to do it. There is no evidence of commitment from Microsoft in any way,” he said.

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