Caldera Systems expands Unix acquisition plans

The Linux seller changes the terms of its planned acquisition of Santa Cruz Operation's Unix products, adding more software to the deal.

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Linux seller Caldera Systems has changed the terms of its planned acquisition of Santa Cruz Operation's Unix products, adding more software to the deal, delaying the closing date by a quarter and agreeing to pay SCO $31 million in cash.

Under the previous terms of the acquisition, announced in August, Linux seller Caldera Systems planned to acquire SCO's UnixWare product. Now it plans to also acquire SCO's earlier version of Unix, OpenServer, Caldera said in a statement Friday.

The main reason for the change is that OpenServer customers were confused about which company would support that software, said Benoy Tamang, vice president of strategic development at Caldera Systems. "It confused them so much that it was time to make changes," he said.

In addition, the acquisition of OpenServer allows Caldera Systems to control the software's future, making it easier for the company to proceed with its plan to encourage customers to switch either to Linux or to UnixWare, Tamang said.

The new terms are among a number of changes in the Linux business landscape, including layoffs at SuSE's North American operation and Turbolinux's planned acquisition of Linuxcare.

SCO stopped development of OpenServer in 1999, and Caldera Systems plans to continue with SCO's practice of only minor updates while encouraging customers to migrate to other operating systems, Tamang said.

The new terms of the deal mean it will close in the second quarter of 2001 instead of the first, the companies said. And Caldera Systems will pay more cash to SCO, which is renaming itself Tarantella after its other software product.

Caldera Systems will pay SCO $23 million when the deal closes and $8 million more over four quarters. Under the previous terms, Caldera Systems would have paid only $7 million.

In addition, SCO will get a fraction of revenue from OpenServer sales and will get 16 million shares in Caldera Systems. Under the previous terms, SCO would have received 17.5 million shares.

Caldera Systems' strategy CNET's Linux Centeris to sell operating-system products that span from low-end Linux machines to high-end 32-processor UnixWare servers with advanced features such as clustering. All these products would be able to run Linux software without it having to be rewritten for the non-Linux operating systems.

While analysts praise some of the high-end SCO features, they expect moving ahead with the strategy of multiple operating systems to be difficult.

The original deal didn't include OpenServer because Caldera Systems wasn't interested in a product that essentially was being phased out and because it wanted to minimize how much cash it had to pay, Tamang said. In addition, SCO was interested in the ongoing revenue stream to fund its Tarentella software business.