The SCO Effect

A nice story at the Register assesses the financial impact ofSCO's Linux lawsuitagainst IBM.

As the piece notes, it's been near a year since SCO first filed - and still they haven't put up any proof that their code is in Linux. But I hadn't realized that SCO's stock has surged to as much as 10 times what it was before the lawsuit - from $2/share to $20/share (it's now around $13/share, the story says).

But that could just be opportunists speculating that IBM will settle and give SCO a bump. But you look at the stock market reaction to the lawsuit as an index of credibility on the lawsuit itself - it's basic market theory, the same idea behind the controversial "terrorism futures market" that DARPA floated - and then killed - last summer. As this Dan Gillmor story points out, the actual theory behind the market is credible - that an open market is very efficient assessment of information.

So take that idea to the SCO world, and you'll have to look at the stock of who might suffer from a SCO victory. The most exposed victim is Red Hat, which even though they're not named in the SCO suit, has taken the action personally, and filed a 'put up or shut up' lawsuit against SCO on their own. In the past year, Red Hat has done just fine:their stock is now at a bit over $18/share, just a notch down from their 52-week high and more triple where it was a year ago.

So the market's verdict seems to be that, while SCO may get something out of their action, it won't impede the continued success of Linux. That's good news - and reassuring to boot.

Posted by thomasgoetz, February 6, 2004 09:36 PM | | TrackBack