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MS-SCO analysis: Questions about the mysterious middle man

By Chris Preimesberger on March 09, 2004 (8:00:00 AM)

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We continue to follow up on the story of BayStar Capital and S2 and their involvement with SCO. S2 Strategic Consulting, formerly located at 56 East Broadway, Salt Lake City, Utah, is the firm hired by SCO Group to help it stay alive. Since SCO hired S2 in August 2003, the little Unix software company that was in danger of failing received a $50 million venture capital cash infusion -- and perhaps much more -- in its bank account.

That $50 million pile of cash has been described as a litigation "war chest" by more than one business publication during the last few months.

Is S2 simply a very good technology company developer? If so, perhaps it can explain -- general terms would be fine -- how it was able to raise so much money for a company that has had serious trouble selling its bread-and-butter products for months. (SCO Group's sales problem is no secret; CEO Darl McBride confirmed it only a few days ago at the company's quarterly "numbers" press conference.)

We tried to ask S2 some of our questions, but the S2 office telephone give callers a busy signal hour after hour -- curious, we thought, for a business whose stock in trade is, in fact, networking and communication? Bob Mims of the Salt Lake Tribune found out through the company's phone provider that the S2 office phone has been out of order for several days.)

That leaves us, for now, with a couple of major unanswered questions:

  • Why does the consulting firm have a useless one-page Web site with no links -- just some large background type that states: "Accelerating Growth in Technology Companies"? (And why does domain registration information for S2.com give the obviously false phone number 123-456-7890?)
  • Why does Mike Anderer, the CEO of S2, a longtime personal friend of McBride, a man with an unlisted home phone number and far-ranging connections in Redmond, Wash. (he and McBride used to work together at IKON Office Solutions, a major Microsoft partner), not make himself available to explain his "misunderstanding" in the deal he allegedly brokered between Microsoft and SCO to bring SCO $50 million last October? Mr. Anderer, if you're reading this, please email us at editors@osdn.com, and we'll give you all the time you require.
  • We tried to reach Chris Sontag, the SCO vice president who has worked closely with Anderer, if he knew where Anderer was, but Sontag was working "off-site" and couldn't be reached. We left a number. Joanie, the administrative assistant who works for Sontag and Darl McBride, told us that not many staff people were in the office Monday.

    A lot of interested folks believe Anderer was hired by McBride and Sontag to connect the Microsoft Development Corp., an investment arm of Microsoft Corp., with the SCO Group, and that it succeeded with the $50 million VC transaction. If this was all on the up-and-up, there shouldn't be any reason for anyone to get defensive; a deal of that nature is perfectly legal.

    But if such a straight investment deal were consummated, it would appear to be an obvious Microsoft ploy to attack, via litigation, the Linux business -- which would certainly be a tad self-serving.

    Of course, there are other ways to move funds from Point A to Point B in order to satisfy the giver, taker, and all those in between, especially when the figure ($50 million) is so high. We're trying to contact Anderer to ask him about this money trail, but even people he works with don't know how to reach him.

    More background on Anderer

    No question Anderer is a busy fellow. Maybe that's why he's hard to find. While at IKON, he was a key member of the management team responsible for developing a new $550 million technology services division at IKON Office Solutions. Most of IKON's products, including printers, fax machines, copiers, and other tools, work with Microsoft Office software. Imagine all the partnering that was done at that time.

    For a time, Anderer also served as chairman of the board and CEO of a Bellevue, Wash.-based technology consulting firm called Entirenet. An Entirenet source Monday said Anderer left Entirenet "about a year ago," but his Microsoft connection was deep there, too. Microsoft is the first client listed on Entirenet's Web site, and the company conducts workshops in Windows XP, Exchange 2000, Microsoft Advanced Deployment, and Microsoft Management Solutions.

    In the late 1990s, Anderer was a co-founder of another tech development company based near Philadelphia called Silicon Stemcell, which is the predecessor of S2 and root of the S2 name. Anderer and five other Silicon Stemcell founders met at IKON. They were entrepreneurs who sold their businesses to what eventually would become IKON. The company's mission was to find promising Internet businesses, then take an equity stake in them in exchange for providing them with the expertise they need to grow as rapidly as possible.

    This is a good and noble business, helping out young companies. That background and experience fits the "middleman" requirement for Microsoft and SCO to a proverbial "T." And note this quote from the story cited above: "'Our goal is to protect, extend, and acquire intellectual property,' said Anderer, who's Silicon Stemcell's president and chief executive officer."

    Since that article was written in 1999, Silicon Stemcell seems to have moved to Salt Lake City, but may have moved again or gone out of business; when we tried to call the listed phone number, we got a "this number has been disconnected or is no longer in service" recording.

    But even if Silicon Stemcell has gone to the corporate graveyard, its original corporate goal sounds a lot like the mission statement that seems to be guiding SCO Group today.

    Anderer appears to be the perfect person to "broker" the SCO Group's finance deals. He has the experience, the know-how, the contacts, the business acumen, and the credibility within this circle of friends to carry out the transaction. In a deal this big, you don't work with strangers you cannot trust.

    One more time: Why?

    Why would Microsoft bother to help keep the little SCO Group afloat through particularly trying times? Look at the big picture:

    Which business entity, in all the world, would benefit most by SCO Group staying in business? SCO is in business, ostensibly, to sell Unix products and services -- but in reality, it spends most of its time and money filing enforcement litigation to protect intellectual property contracts that are widely considered questionable in nature.

    Which business entity could most easily afford to fund a company like SCO Group directly -- and would also have the power and influence to fund it indirectly?

    The answer to both: Microsoft.

    Microsoft, however, officially denies it has any financial relationship with SCO Group other than a licensing agreement, and appears -- in recent months -- to be backing completely away from the little Utah company as the heat in the kitchen gets hotter.

    That leaves us with some very questionable appearances. Perception isn't always reality, but it comes awfully close to it a high percentage of the time.

    Remember: What you smell cooking in the kitchen is usually what is served.

    NewsForge reported yesterday that the U.S. Securities and Exchange Commission "may have begun investigating the relationship between the two companies" due to a large number of complaints filed by telephone and through complaint forms on the SEC Web site. SCO Group spokesman Blake Stowell told NewsForge that, according to the company's CFO, Robert Bench, "if the SEC were to be investigating the company, SCO Group would be required to make the investigation public immediately."

    "As you can imagine, SCO Group has no announcement of that kind to make," Stowell said.

    Of course, SCO Group needs only to make public the investigations that it knows about. The SEC is known to be quite thorough in its preliminary fact-gathering before starting a formal investigation.

    Stay tuned -- there's more to come.

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    Comments

    on MS-SCO analysis: Questions about the mysterious middle man

    Note: Comments are owned by the poster. We are not responsible for their content.

    Twins

    Posted by: SarsSmarz on March 10, 2004 12:33 AM
    I love how 'Protect, Extend, Acquire' closely resembles the Gatesian 'Embrace, Extend, Exterminate'.

    #

    what worms

    Posted by: Anonymous Coward on March 10, 2004 12:59 AM
    all these guys are worms and all they care about is the almighty dollar - not about making a quality product like OSS/FSF does.

    man this just keeps getting slimier and slimier.
    and where are all these people that are suppose to be at all these disconnected phones.

    I've been slimed - I got to go take a shower.

    #

    ya I bet

    Posted by: Anonymous Coward on March 10, 2004 01:11 AM
    you bet they are not in the office

    I have a suspicion they are all meeting to get their stories straight before they start lying.

    boy what inovation. way to go bill and steve

    #

    Forget "Martha"

    Posted by: Anonymous Coward on March 10, 2004 01:44 AM
    God help Darl, his merry bunch of FUD-sters & "hangers'-on", if the mainstream media (see: CNN, ad infinitum) ever gets ahold of this one. It'll push the upcoming-election's dirty-tricks right out of the ether. And what will 'The New York Times' (print media) have to say?

    <evil grin>

    #

    Re:Forget "Martha"

    Posted by: raindog on March 11, 2004 11:39 AM
    You'd think so, but (a) none of the SCO execs are household names, and (b) thousands of people are not going to lose their pensions when SCOX craters.

    It'll make the papers, but it'll be in the business pages somewhere, not on the front page. It'll make CNN Money, but not your local newscast.

    #

    Re:Forget "Martha"

    Posted by: Anonymous Coward on March 13, 2004 07:59 AM
    But Bill Gates is a household name. His involvement
    may be indirect; but Martha claims her involvement with
    the insider trading was also indirect. There's a lot of
    anger out there amongst helpless home computer users
    who get hit by viruses and system crashes and don't
    know who to blame but somehow feel they have been sold
    a lemon.

    #

    SCO cratering on no news

    Posted by: Anonymous Coward on March 10, 2004 03:59 AM
    Right <A HREF="http://finance.yahoo.com/q/bc?t=1d&s=SCOX&l=on&z=l&q=l&c=%5ESPX&c=%5EIXIC&c=%5EDJI" TITLE="yahoo.com">here</a yahoo.com>

    The message board on SCO is a hoot as well. I wonder if all the yahoo message boards are filled with such dribble. The institutional traders and the professional traders that clear their own trades must watch over these message boards the way a vulture watches over its prey. With a salivating mouth.

    #

    Re:SCO cratering on no news

    Posted by: Anonymous Coward on March 10, 2004 08:57 AM
    > The message board on SCO is a hoot as well.

    The SCOX message board on Yahoo is noisy, but carries some of the best information on SCO to be found anywhere. If you were following that board, you would have known more about Anderer and the Microsoft connection back in January than you know now.

    #

    Re:SCO cratering on no news

    Posted by: Anonymous Coward on March 10, 2004 09:11 AM
    Nice try.

    The SCO/yahoo message board didn't break that news.

    Anyone holding a position (or planning to) on SCO that relies on that message board for ANY decision making will be eaten alive by the sharks. And that's if the shark bait has direct access to trades (clears his own trades). If not, then they aren't even worthy enough for the sharks. They'll be eaten alive by any of the professional traders out there.

    Don't you worry about it though. Because for every winning trade, there is a loser on the other end. You are an essential part of the market. Really, you are.

    #

    Re:SCO cratering on no news

    Posted by: Anonymous Coward on March 10, 2004 11:45 AM
    Sure it did.

    Message posted on January 29th.
    The number is 87038.

    Please find any press article that
    predates this, and I'll admit that
    you're right.

    I'm not the same fellow that you
    replied to, btw.

    #

    Anyone else notice SCO's stock isn't doing so well

    Posted by: Anonymous Coward on March 10, 2004 04:06 AM
    Down almost 10% today alone.



    <A HREF="http://finance.yahoo.com/q/bc?s=SCOX&t=1d" TITLE="yahoo.com">http://finance.yahoo.com/q/bc?s=SCOX&t=1d</a yahoo.com>

    #

    Re:Anyone else notice SCO's stock isn't doing so w

    Posted by: jlguallar on March 11, 2004 02:11 AM
    Yup.
    SCO shares used to be around $20.00.

    Now the same share hardly make it to $10.00. Maybe this is te begining of the end.

    Although I hope that SCO survives long enough to get a harsh (and fair) ruling in the SCO vs IBM case.

    #

    Not only s2.com

    Posted by: Anonymous Coward on March 10, 2004 04:41 AM
    They also 'own' www.s2.net;

    same lame page without the links.

    #

    Re:Not only s2.com

    Posted by: Anonymous Coward on March 10, 2004 10:49 AM
    The Wayback Machine can help with that.

    #

    "...No Comment..."

    Posted by: Anonymous Coward on March 10, 2004 05:52 AM
    In STARK CONTRAST to every other possible sound op in the past. They yhink they're clever even if no one else does, so ya gotta wonder.

    #

    Wanna bet??

    Posted by: Anonymous Coward on March 10, 2004 07:54 AM
    I'll wager that 6 months from now: "SCO Bankrupt, SEC Investigation, McBride and Cronies walk just like Enron"
    Dont worry Darl; Martha has made Fretatta and is knitting sweaters for all; and Michael needs a hug.
    Thats okay though just keep smiling and remember that it's all perfectly LEGAL in the USA.
    Thanks Dubya!

    #

    I wonder...

    Posted by: Anonymous Coward on March 10, 2004 08:29 AM
    ...if you'd apply the same attacks to Liar & Global Crossing.

    As for Enron, Kenny Boy was the sole idiot that was BUYING shares as the company sank. Kinda tough to prove the same case against him with the same charges they are getting pleas out of the others with that fact in the way. That's a fact that's convenient to forget. And from what I've seen so far, unless I'm mistaken, there have been some guilty pleas (and freezing and forfeiture of property) in the Enron case. And others are still in the legal system.

    One more observation: when was it that Enron and Global Crossing and the rest of the crooks were doing their damage? And under who's watch are the investigations and prosecutions by career prosecutors happening?

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 10, 2004 08:54 AM
    You're right, Bush Sr. is also heavily to blame for all of this.

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 10, 2004 09:21 AM
    And during the 8 years of Clinton, everyone was completely ethical and forthright in all they did, right?

    Yea, right.

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 10, 2004 12:39 PM
    You all give the Executive Branch way too much credit. Doesn't Congress pass (or not pass) the legal basis of how this country is run?

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 10, 2004 02:47 PM
    Congress makes laws. The Executive branch is charged with implementing/enforcing them. Now we see Martha Stewart convicted. Bernie Ebbers is charged. Ken Lay is being charged. So... how can it be claimed that nothing is being done by the Administration's prosecutors?

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 11, 2004 02:02 AM
    Well, perhaps if the legal might of the country wasn't being aimed by the republicans at Clinton's sex life a few things may have been spotted earlier than they were. But hey, it's all about family values, right?

    #

    Re:I wonder...

    Posted by: Anonymous Coward on March 11, 2004 10:29 PM
    Well, perhaps if the legal might of the country wasn't being aimed by the republicans at Clinton's sex life


    Clinton's sex life? his sex life had no bearing on the issue.


    His inability to give an honest answer under oath at deposition did.


    If we use the Bubba rule, then Darl McBride is a completely truthful person, and the Enron and Global Crossing people should not only walk, but be given apologies from the SEC and DoJ.


    The problem with defending Bubba's lying ways is that you defend a whole raft of evil doers. Or you become a hypocrite.

    #

    article tone

    Posted by: Anonymous Coward on March 10, 2004 09:08 AM
    Although the truth of the story may be exactly as presented, this article's condescending--at time sneering--tone damages its credibility. Perhaps that's the level of respect SCO et al deserve, but please try to stay civil; it will be that much harder for them to disregard!

    #

    Re:article tone

    Posted by: Anonymous Coward on March 10, 2004 11:45 AM
    i agree totally. the condisending attitude of the paper made it easily dismissed and unregarded. i would never refer this article to anyone, even if they were asking questions on this specific topic.

    #

    Re:article tone

    Posted by: Anonymous Coward on March 11, 2004 02:05 AM
    I do agree with that in some sense, but it's certainly less opinionated than the bulk of articles covering the beginning of SCO's legal onslaught. I must admit, it's refreshing to see an article where someone is actually following through and investigating. I just think it's a shame no one did until the smell of scandal shit the water. Boy the sharks sure can smell it a mile away.

    #

    Wayback Lookup

    Posted by: laughingvergil on March 10, 2004 09:41 AM
    Some of the questions in this article can be answered by looking at the <A HREF="http://web.archive.org/web/20011024054453/s2.com/contact/locations.html" TITLE="archive.org">Wayback Machine</a archive.org> for s2.

    • The Silicon Stemcell company closed to outside investors (and probably closed its public face) when S2 was formed.

    • S2 started in Redmond. Its core founders were core IKON team members.

    Take a look at what the S2 site used to look like....

    #

    Conjecture on conjecture on conjecture...

    Posted by: Anonymous Coward on March 10, 2004 10:09 AM
    This kind of reporting is about as objective as George W. Bush; which is to say, it is about as self-involved and self-serving as reporting can get. Innuendo, conjecture, FUD... it's all there. Congratulations on being everything you accuse the "enemy" of being, Newsforge. What a valuable player in the Open Source Propaganda Network you are.

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: Anonymous Coward on March 10, 2004 10:13 AM
    This kind of reporting is about as objective as George W. Bush

      Really? I would have said about as objective as Michael Moore except the piece didn't actually fabricate the whole story, it was just snotty.

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: Anonymous Coward on March 10, 2004 01:54 PM
    Both are flip sides of the same coin: self-righteous, one-eyed and happy to distort and misrepresent facts if it will advance their own agenda.

    I'm sure the author of this article must be bursting with pride to be compared to two modern day luminaries such as these.

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: CJ Preimesberger on March 11, 2004 04:46 AM
    Getting a little uncomfortable, are you?

    <nobr> <wbr></nobr>/cp

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: CJ Preimesberger on March 11, 2004 04:47 AM
    And your definition of snotty would be<nobr> <wbr></nobr>... ?

    <nobr> <wbr></nobr>/cp

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: Anonymous Coward on March 10, 2004 02:59 PM
    Except you missed one important aspect, crediblity. I believe Chris Preimesberger and Newsforge way before I believe anything that comes from SCO or Microsoft.

    Maybe Newsforge's opinion will pan out to be wrong, but you will have to agree history so far has shown both MS and SCO to be so devious that they cannot be trusted at all. You need proof, point your browser to Google and start looking. It won't take long and it will be like a brick wall hitting you.

    I'm not a Linux sympathiser, but I'm also not stupid. I can see with my own eyes the crap MS has pulled and I know, that what was reported here fits their MO. Maybe Mr. Preimesberger could have been more neutral, but it's natural for those that are being treaded on to be a little testy about what's happening.

    SCO drew first blood. They may have been right at one time, but they are not now. And I hope this line of research confirms all the innuendo, conjecture, and FUD that you spoke of. And not for the sake of proving you wrong, but for exposing something that is fundamentally wrong in the world.

    And you better think what side you're on. Because this isn't just about SCO's IP maybe being in Linux, but this is about an attack on your inaliable rights and goes to the core of freeing humanity or enslaving it. Are you so willing to let those that want to control you win? Maybe you just don't see the bigger picture? Hopefully, with a little patience on your part, you too will come to see we are all pitched in battle deciding whether we are individuals contibuting to the whole, or we are resources to be used by the few.

    #

    Re:Conjecture on conjecture on conjecture...

    Posted by: Anonymous Coward on March 10, 2004 08:50 PM
    You're right.

    SCO and MS could clear the whole thing up in minutes with one press release stating unambiguously that all this speculation is wrong, that no illegality occured and that they are delighted to appoint an independent auditor to certify this.

    Over to you, SCO and MS.

    Hello?

    #

    Similar to Apple?

    Posted by: Sharper on March 10, 2004 10:29 AM
    MS has a history of pushing a little cash around to other companies to help fight it's battles. Remember when MS invested in Apple in order to prop them up and try to get the U.S. Justice Department off their back.

    Hey, $50M here, $50M there and pretty soon MS has a bunch of little pie pieces that happen to help it strategically.

    It's an interesting comparison to the simpler "buy the whole company" strategy employed by MS and others elsewhere.

    #

    Weird thing

    Posted by: Anonymous Coward on March 10, 2004 12:49 PM
    goto www.SiliconStemcell.com and you are re-directed to www.fbi.gov

    this is quite strange, may there already be an investigation?

    #

    something I'd like to see

    Posted by: Anonymous Coward on March 10, 2004 01:51 PM
    I do agree that the article was a bit snotty and somewhat one-sided, but what can be expected with all that has happened with Microsoft and now SCO. Fictitious, no. No evidence to substaniate allegations, yes. It's difficult to substantiate anything when certain people/companies are doing all they can to keep it buried, burned, or demagnetized. What I would like to see are answers, even if they come from within the suspected companies lower ranks. I also would like to see some HEALTHY competition from Microsoft. Business has become too much like seedy politics and Microsoft is the leader of the movement. It needs to stop. I don't know how but I would love to hear suggestions because it needs to change.

    #

    Re:something I'd like to see

    Posted by: Anonymous Coward on March 10, 2004 02:00 PM
    To summarize: Microsoft and SCO are fair game for any unsubstantiated allegations because the allegations are not likely to be substantiated. But if people within the company substantiated them, which they are not doing, then that would be great.

    No prizes for spotting the enormous holes in that argument.

    #

    Proof of MS connection

    Posted by: Anonymous Coward on March 10, 2004 07:48 PM
    They are runnning Microsoft-IIS/5.0 web
    server !

    Server: Microsoft-IIS/5.0
    X-Powered-By: ASP.NET
    Content-Location: http://208.186.137.80/Default.htm<nobr> <wbr></nobr>...

    Uhhh, interesting TCO per webpage ratio<nobr> <wbr></nobr>:-)

    #

    Re:Proof of MS connection

    Posted by: Anonymous Coward on March 11, 2004 07:19 AM
    They are runnning Microsoft-IIS/5.0 web
    server !



    given that that is the second most widely used web server, i think it's hard to draw any conclusions from that

    #

    Re:Proof of MS connection

    Posted by: Anonymous Coward on March 11, 2004 08:45 AM
    nope, i clearly see the connection.

    #

    Bad journalism

    Posted by: Anonymous Coward on March 10, 2004 09:53 PM
    Wow - Has newsforge turned into a British Tabloid? Or perhaps CNN, or the Vancouver Province? The writing in this article is truly a work of art. I thought only esr could write this poorly.

    Don't get me wrong - the points made are all valid, and presumably correct, but this style of reporting only makes NewsForge look incredibly incompetent.

    #

    Re:Bad journalism

    Posted by: Anonymous Coward on March 10, 2004 10:24 PM
    I don't share this view. I enjoyed the article and upon rereading, thought it read well.

    #

    Re:Bad journalism

    Posted by: CJ Preimesberger on March 11, 2004 04:52 AM
    You're a little uncomfortable now, also. If the points are valid and presumably correct<nobr> <wbr></nobr>... wait, I don't see your point.

    <nobr> <wbr></nobr>/cp

    #

    Re:Bad journalism

    Posted by: Anonymous Coward on March 11, 2004 09:18 AM
    If you weren't aware: not every visitor of this site speaks English as native language.

    #

    OS/2 wars post

    Posted by: Anonymous Coward on March 11, 2004 11:12 AM
    There's a couple of them here, and in a couple of the other stories.

    It looks like one of the tactics by Microsoft-SCO is going to be to attack the credibility of the reporters.

    Expect more to come. A lot more. Especially as the earnings/profits/market share start taking hits.

    #

    4567 South Mathews Way

    Posted by: Anonymous Coward on March 11, 2004 07:26 AM
    AFAIR this is a very rich all, residential area (Olympus Hills). Strange address for a business unless S2 is a solo operation.

    #

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