How Microsoft is tied in
Last month, BayStar confirmed that several highly placed Microsoft executives initiated the idea of the PIPE fund transfer to SCO Group. Chairman Bill Gates and CEO Steve Ballmer were not among those executives, McGrath said.
The admission was additional evidence of an alleged Microsoft-SCO Group cash pipeline for many members of the open source community, who believe Microsoft is quietly backing SCO in its many lawsuits against companies that use Unix and Linux in their enterprise IT systems. SCO Group is suing a number of companies, including IBM, Novell, DaimlerChrysler, AutoZone, and others for allegedly using its proprietary Unix System V code in open source Linux IT systems.
The most credible evidence of Microsoft's involvement thus far is a memo from a former SCO Group contractor, Mike Anderer, who described details of the transaction to SCO Group executive Chris Sontag in what later became the "Halloween X" document after being leaked to open source community leader Eric S. Raymond on March 3.
"I look at this as bad news for SCO," Dion Cornett, an analyst for Decatur Jones Equity Partners-Soleil told TheStreet.com. "I don't think BayStar is going to be very successful in getting their money back. It's very difficult for a private equity investor to force a redemption on a company that doesn't want to redeem. But it makes it very difficult for SCO to raise future financing."