SCO will use the funding primarily to boost its software development efforts and secondarily to help pay legal and licensing costs, spokesman Blake Stowell said. SCO sells the Unix operating system and licenses it to others, but more controversially, it has sued IBM over Big Blue's treatment of Unix and argues that companies should pay SCO to use Linux.
The investment is a turnaround for the company. In May, chief executive Darl McBride said during a conference call with financial analysts that SCO had investment offers on the table. "We decided not to take those investments, because we were able to generate larger amounts of cash from SCOsource"; cash that wouldn't dilute shareholder's stock value, McBride said at the time.
But Thursday's change in plans means the company's cash will be better matched to its ambitions. "I think we were happy we were building cash and that we were profitable, but if you want to be able to do some big things on the level we would like to do them, then having that cash available immediately certainly helps," Stowell said.
BayStar bought preferred shares that are convertible at a price of $16.93 per share of common stock. That conversion that would give BayStar 2,953,000 shares, or 17.5 percent of outstanding shares, SCO said.
"With a $50m investment from BayStar, we believe we have secured the capital necessary to fund all aspects of the long-term growth of this company," McBride said in a statement.
The company had $11m in cash on 31 July but now will have about $61m, SCO said.
The new cash sends a message. "For anyone out there that was doubting we had the necessary funds to fund that litigation, they should rest easy now," Stowell said.
SCO sued IBM in March over its handling of Linux, arguing that Big Blue illegally moved Unix technology into Linux. But IBM has countersued, and Linux seller Red Hat also sued SCO in an attempt to lay the matter to rest.
SCO is scheduled to respond to IBM's amended complaint on Monday, Stowell said.
SCO's software business focuses on selling two versions of the Unix operating system, UnixWare and OpenServer, and on a Web services strategy called SCOx.
Gartner analyst George Weiss, however, believes the $3bn lawsuit against IBM overshadows all else.
"There is no coming back from the dead if they lose," Weiss said. "It's all or nothing."
SCO's licensing program seeks to compel companies to pay $699 for a one-processor Linux server, more money for more powerful systems, and $199 for every Linux desktop. SCO pushed back a deadline to double those prices until 31 October.
BayStar approves of SCO's plans.
"BayStar Capital looks to invest in growth-oriented firms with strong management, substantial market opportunity and solid, comprehensive business plans, and we believe that all of those fundamentals are in place for SCO to succeed," said Lawrence Goldfarb, a BayStar general partner.
