The Love of Linux Chapter 4: In Spite of Setbacks

Caldera made other significant investments to try to get applications to Linux with very mixed results and a lot of criticism and similar results. Linux by itself was great technology, but businesses bought solutions. Many of our efforts to license, port, or add applications to Linux were misconstrued by the Linux community. Some interpreted our efforts as trying to take Linux proprietary. The bundling of commercial and open source products together caused confusion on the licenses, but we felt that Linux needed a full complementary set of applications in order to be embraced more fully by business. We began early on to partner with larger companies to help complete the solution. We licensed the WordPerfect for UNIX code from Novell and contracted to have WordPerfect for UNIX ported to Linux. Through Canopy, Ray Noorda’s investment company, we had nearly purchased all the UNIX based applications from Novell. Unfortunately, the day or two before the sell was to be finalized, Mary Burnside, a Novell executive, stopped the sale because of the pending sale of the DOS and Windows applications to Corel. We were able to OEM WordPerfect for UNIX and port it to Linux. In addition, Caldera found a spreadsheet written by a professor at North Carolina University and introduced the first Office bundle for Linux that included a Word Processor and a spreadsheet.

Corel had no interest in the UNIX applications but Mary did not want to jeopardize the sale. After the sale with Corel was announced, Caldera made many attempts to work out a relationship with Corel and move this work forward, including several meetings with Michael Cowpland. Corel moved very slowly if at all at first. However, when Linux downloads for WordPerfect continued to climb, Corel latched on to what they thought might be their rising star, Linux. But their entry into Linux was too soon in the Linux industry and too late for Corel. Corel, though on the downward slope, as one of the first companies help legitimize Linux. However, one of their downfalls, was they seemed to want to do everything themselves. Corel appeared to want to be the next Microsoft and do it alone rather than partnering. They, like Novell before them, had the opportunity to be the catalyst for the entire Linux industry. Instead, they choose to compete directly with all the other Linux providers by producing their own distribution. The also were trying to get their Windows suit to run on Linux through a Windows emulation layer. The following document sent around November 6, 1998, outlines one of our many attempts to work with Corel.

Corel and Caldera joint activities.

Objective: The purpose of this document is to provide a high level overview of projects, roll-outs and activities that Caldera and Corel could do together to help establish their joint product offerings as a “Linux for Business” Solution.

Possible Software Activities

Joint offering of Software on the Retail Shelf:

Caldera and Corel could offer a joint bundle together onto the retail shelf. This could be accomplished in the following ways

Slipstreaming:

Slipstreaming WordPerfect 8 for Linux into Caldera’s 1.3 retail boxes. If Corel would provide the copies of the personal additional on CDs and Sticker for our current box, Caldera would provide the labor to slip the personal addition into our box and sticker the box. This could happen quite quickly. We would do a Press Announcement on this

Putting Corel Software on Caldera’s CD

Caldera is currently working on a new release of their distribution, Caldera and Corel could work together on putting together an install package and provide the personal addition as a key business app on the new box. March timeframe.

Maintenance Releases:

Include Corel enhancements to KDE and our Maintenance release and ship this as an update to our product. At this time, we could ship personal copies with the maintenance release. January timeframe.

Book Deals:

We are currently working on bringing business solutions to the market for OpenLinux. Caldera would like to get the rights to the printed material, create a book quickly and then put the personal addition with OpenLinux in the back of a book and ship this out to the book shelf. In addition, depending on the margins, the distributor of books could box this up and send in to the retail shelf. Given that Caldera’s Product and Corel’s product are internationalized, we could push this into the market very, very quickly. Note: In no way would this take away from other publishing opportunities that Corel may have with their publishers. In fact this will increase sales of the full product, because of more points of presences. There could be at least 2–3 books. One from Caldera Press, one written by Corel and another one more advanced.

Mirror Sites:

Caldera and Corel could mirror each other’s sites and provide links to each other location.

Vertical Business Server:

Corel and Caldera could work together in providing a server/client license on our Vertical Business Server. Because of the file and print services inherit with VBS, Corel could provide both Windows and Linux offerings. A One User Server license for WP8 Linux or Perfect Office on the Windows side could be included with our VBS base product with options to buy 5 or 25. The product would pre-install. Bump packs with 5 and 25 users through the channel. If we provide Corel the core product, could we have an x86 hardware/software solution in the Feb./March time frame from Corel? Regardless, Caldera would like to offer the software solution through the channel with the bump packs coming from Corel.

Training manual:

Corel could provide either a personal addition or potential a limit server addition of WP8 to every training attendee. This would be free of charge in our training kits. We would only provide the CD unless Corel wanted to provide the Manual free of charge as well. The reason is to catch the upgrades on the backside with this System Administrator. In fact we might be able to even use WP8 as the example for loading applications during training.

COAS

We would like to explore joint development on (Caldera Open Administration System (COAS) where it makes sense for both companies.

LSB

We would like to explore ways to make the Linux Standard Base (LSB) reference platform available on StrongArm by Corel.

KDE

We are doing a lot of work with the KDE developers on integrating COAS. If we can promote your changes to the desktop, we would like to include them in our products. If there are other areas that make sense to work on or things that need to be changed in KDE, we can work together to make the necessary changes with the community.

Announcement

We should target an announcement of the relationship be end of November. This could include the bundling of WP8 in the retail box and some collaborating statements on KDE/COAS/LSB whatever makes since.

January we would like to roll VBS with joint channel recruitment efforts. Joint mailings, city to city tours, etc. We would do an announcement of our maintenance CD including KDE enhancements and Corel WP8.

March, we would like to continue to have VAR recruitment and training efforts at LinuxWorld with joint marketing of VBS. Would be ideal if Corel Computer had x86 hardware configuration.

When our attempts to work out a relationship with Corel failed, we looked overseas at a company in Germany called Star Division that produced the product Star Office. In Germany, they had nearly as much market share as Microsoft Office. I flew over and met the president Marcos Borries. Again, Marcos was sympathetic to Linux, but he would not commit to a port unless Caldera gave him prepaid royalties. Caldera made what for us was a sizeable investment in prepaid royalties. But Star Division continued to delay the Linux product and it was clearly not of the same quality of the Windows or other platforms Star Division offered. After delaying their shipment of the Linux port, I composed and sent the following letter,

Marco and Juergen,

Caldera has had several disturbing conversations during the last few days with Juergen regarding the contract addendum. Juergen, who Caldera was told had the full authority to negotiate for Star Division, agreed to everything in the addendum. In the past two or three days, Star Division has expressed concern that the addendum in its current form was changing the terms of the relationship. Other than making adjustments so that Caldera can recoup its investments, no other terms are changed.

The latest communication is that Star Division just needs to reevaluate and would like to know what Caldera’s forecasts are for the coming year. Star Division is not in a position to reevaluate its partner. Caldera paid Star Division $350,000 which Star Division has used for over a year without delivering a product that Caldera could sell. Star Division’s inability to deliver 4.0 has cost Star Division and Caldera dearly in the Linux market. Applixware is in all the retail stores in the U.S. and has gained an ally in Germany with SuSE. Many of our best resellers are now selling Applilxware because it is faster, easier to use and is server based. Applix is even courting Caldera. Star Division’s failure to deliver has prevented Caldera from more tightly integrating the product into the OpenLinux products for this next release. StarOffice will again look and feel like an after thought. Dates were given to Star Division months ago. Commitments made by Star Division have all been broken. Yet we hear that you have signed deals with Oracle and Sun. Where is Caldera’s code? What about your existing commitments? If Caldera does not receive the addendum, which allows Caldera to recoup the investment, and the production quality code by Friday, Caldera demands that Star Division remits the prepaid royalties plus interest as stated in earlier correspondence.

If Star Division would like to partner with SuSE directly, please enter a license agreement with SuSE for $500,000, keep $100,000 and send the remaining $400,000 to Caldera that will repay us our initial investment plus interest on that money. Caldera is very tired of financing technology for the entire Linux community and being a bank for Star Division! If Star Division does not wish to remit the prepaid, then honor the contract, deliver a signed addendum and quality code by Friday and allow us to market the technology.

Section 3 of the original contract clearly states that Star Division only “reserves the right to sell site licenses on Linux operating system to Star Division customers requiring cross‑platform licenses.” It further states: “OEM may grant Distributors and Resellers the right to grant further sublicenses to distribute copies of the Star Division Products to other Distributors and Resellers regardless of tier…. OEM and all Distributors and Resellers shall have the right to distribute the Star Division Products to End Users.”

With these being the terms, it is clear that Caldera has been granted the exclusive on the distribution of StarOffice for the Linux platform. Caldera, when and if Star Division delivers a quality product, intends to aggressively market your products to other Linux providers, OEMs and channel partners. Star Division’s lack of commitment to Linux and honoring the contract by delivering a quality product has greatly hurt Caldera and Star Division’s ability to gain market share. It is not Caldera that needs to be evaluated, but Star Division’s commitment to Linux and honoring its contracts with quality, timely products that are supported on equal terms with other platforms! Caldera is confident that Sun has not been treated with such disrespect.

Caldera would like to discuss with you our plans, which include the ability to distribute Windows95 or Java StarOffice suites through a turn-key application servers. But it is time for Star Division to live up to its commitments, and then Caldera will be happy to share with you our marketing and sales plans for the coming year. At this time, no one at Caldera believes that Star Division will deliver anything on Friday. Deliver the code and the addendum, by Friday and Caldera will be happy to share with you our plans and forecasts. If quality code and an addendum are not here by Friday, Caldera will expect repayment in full plus interest.

Respectfully,

Bryan Sparks

President and CEO

Ransom H. Love

V.P. Strategic and Business Development

To Star Division’s credit they did eventually deliver a much better quality product. Shortly after its availability, however, Marcos, disregarding our exclusive agreement signed a deal with SuSE to begin to distribute the product in Germany. SuSE, by focusing on their local German speaking markets, had established a large market share in Germany. I do not believe SuSE had to pay any prepaid royalties, but it severely limited our ability to exhaust our prepaid monies since Germany is where Star Division had its biggest market share. We were able to negotiate a reasonable settlement with Star Division, but we never used all of the prepaid royalties. Because of their support of Linux, Star Division was considered a true supporter of open source when Caldera’s money helped fund and support the port and Caldera was seen as trying to take advantage of the open source community as we were forced to get our prepaid money back by charging for the software. Star Division was later purchased by Sun and StarOffice was published as an open source suite. Marcos came to us as an employee of Sun and negotiated the purchase from Caldera the name OpenOffice which is what the technology is known by today. I would guess that the majority of the desktops it runs on today are Linux. Clearly, Caldera was very instrumental in the future of this company and in bringing key applications to Linux. In spite of the perceptions in the open source community and frustrations with the commercial Independent Software Vendors, Caldera continued to strive to bring the necessary suite of business solutions to market. Unknowingly, Caldera facilitated and helped finance Star Division’s future as it had done for Corel.

To enhance both the Internet client and server capabilities of Linux, Caldera signed a multi-million dollar contract with Netscape. Because Netscape did not really see any value in Linux at the time, they required us to prepay millions of dollars to allow us to sell their browser and port their servers to Linux. The marketing and sales people did not even know that a browser existed on Linux on their web site. Because the amount was so high, Netscape offered us an exclusive relationship to sell their browser and server products on Linux. After signing the agreement, Caldera began to approach the other Linux providers and sell them licenses for the commercial browser. Having a commercially supported browser available for Linux was a major breakthrough as the Internet was beginning to explode and Linux was the platform of choice. Caldera was successful in working out a relationship with Turbo Linux and was close to an agreement with Red Hat. Only two or three months after signing the agreement, Netscape published the browser for free. Since Linux was being utilized for its Internet functionality, both as a server and as a development workstation having a browser and HTTP server were essential. Every Linux product offered would have needed to license the browser and we could have at least been able to earn back our prepaid royalties. Making the browser free would have been fine if Netscape had given us back our prepaid royalties but they absolutely refused. Without being able to sell the browser, Caldera was severely limited in our ability to ever recover our investment.

The Linux and open source community responded in almost hero worship of Netscape for leading the industry revolution toward open source. It is easier to give something away, when someone else has helped pay for it. Caldera, on the other hand, was seen by some in the community as trying to take over Linux and make it proprietary. To make matters worse, Netscape used the work we had done to port the Netscape servers to Linux to develop their own server products on Linux that would compete against ours. To get around the exclusivity, they claimed that they were re-compiling Linux on Redhat, so it was not our port. Apparently we had an “exclusive” on our own version of Linux. The problem with their argument is all of the changes we had made to port their server applications to Linux were put back into the main source code tree. Caldera probably still has their name in many of the server header files. All efforts to negotiate a settlement without a legal suite were futile.

Even while we were negotiating with Netscape to resolve these outstanding legal obligations, Netscape also choose to invest in Redhat, paving the way for Red Hat to go public. Caldera decided that we could not afford the time and cost of yet another major suit. Caldera was already seen as the money hungry capitalist of the Linux community. Almost ironically, the first three major companies to publicly announce support for Linux were Star Division, Netscape and Corel. I don’t believe any of which would have fully seen the Linux opportunity without Caldera’s significant investment of money, effort and vision.

The lawsuit against Microsoft brought a lot of public attention to Caldera, but it caused significant pain. We felt the lawsuit was necessary because Microsoft held a stranglehold on the Original Equipment Manufactures because of their unfair pricing models and discounts. They were in blatant violation of antitrust laws and were leveraging their monopoly position to crush any possible competitor. No one, not even the government, was willing to take on MicroSoft and we felt something needed to be done. We felt many companies were suffering from MicroSoft’s business tactics and would have welcomed our efforts to bring them to justice. However, while they my have secretly been cheering Caldera on, they lived in fear of retribution and they would continue to jump when Redmond said jump. Consequently, Caldera’s business suffered even though we often had the best product or solution available. For example, Intel was looking for a Linux company to help them port Linux to the IA64 architecture. Caldera put its name and engineering expertise to work. We organized the effort and submitted a proposal. The reports back were that ours was the most impressive and thorough of all those presented. The difference between our proposal and those others that were submitted was significant. Our Intel representative felt we were assured the contract. We were expecting to get the nod from Intel to lead the effort. A week later, I received a call from Larry Augustine of VA Linux, not Intel, letting us know that Intel had asked them to head up the IA64 effort and they wanted us to support them. VA Linux also received an investment and endorsement for their efforts. When Caldera asked Intel why they had not selected us even though our proposal had been the most thorough, the response was Microsoft had called their executives and did not want them to work with us and besides; VA Linux was a hardware company and was independent. We wondered, “Why would you want a hardware company lead a software initiative?” This was long before VA Linux had gone public and hired many of the leading Linux developers. At the time, they were selling PC’s preloaded with Linux. Interestingly, this pressure from Microsoft on Intel continues, even long after the suit was settled. Just after the purchasing of the SCO server division, Caldera was a sponsor of an Intel show in Korea where Caldera’s Linux and UNIX products are well accepted in both private and public sectors. Bill Gates visited Korea and found out we were part of the show and threatened to withdraw all of the sponsorship funding unless Intel asked us not to participate which they promptly did. Intel’s appointment of VA Linux to this work and its subsequent investment, led to VA’s extraordinary IPO. The interaction with Intel on the IA64 initiative was the first of several interactions with Intel that caused us to begin to question Intel’s motives behind their work with Linux because of the strength of their relationship with Microsoft and its influence on the company.

While working with these other companies, Caldera continued to try to get Novell to live up to its commitments on licensing their technologies to Caldera. Although Caldera kept its word to file the lawsuit and continue to finance the ongoing expenses (Caldera had to leave all of these items out of the agreements with Novell because they did not want to be linked to the suit), Novell only allowed Caldera access to the NetWare for UNIX code that we ported to Linux. On all other points of the agreement, Novell just simply refused to live up to the contract. The source code to needed applications like GroupWise, were never furnished. Caldera Thin Clients, Inc. later called Lineo who acquired the DR DOS asset when the company split negotiated a reduction in royalty or something of significant lesser value than the applications would have been to Linux and Caldera Systems.

Through these agreements, and other marketing and development efforts, Ray Noorda had invested nearly 16 million in promoting Linux to the world. This was far more than all other entities and companies combined at that time. Nearly all of the major companies who had endorsed Linux had been led to Linux because of Ray’s investments. And those who knew Ray, know that he did not want the credit, but Caldera and Ray did not only receive little or no credit, they were despised by some of the Linux community as “trying to make Linux proprietary” or at least taking advantage of the Open Source community for monetary gain. The criticism was spurred on because we did not interact a lot with the community. The community was not our customer. We were following the traditional marketing wisdom of trying to deliver a total product to a targeted customer and we had conscientiously chosen to not focus on the developer.

These were very difficult times internally. Many key individuals in Caldera, Inc. lost faith in Linux and wanted to sell only DR-DOS in the embedded market. They saw no way to pay back the debt that had been amassed, primarily from dealing with these large companies. Canopy and in particular, Ray Noorda was concerned about how he was going to get his money back, which added a great deal to the stress. I felt strongly, that we needed to continue with Linux and was quite vocal about my beliefs. As a result, I found out later that there was a strong desire and an attempt with the board to let me go. Ralph Yarro, CEO of Canopy Group and Ray Noorda felt that they wanted to continue with Linux to see if they could recoup their investment. We initially split Caldera, Inc into two divisions, the DOS embedded division and the Linux Division. Bryan Sparks headed up both the DOS Division and the company and I took over the Linux business as the General Manager. Great pressure was being placed on those who remained with Linux. DOS and the potential proceeds from the MicroSoft suit was the lure to work for the DOS Division. The many set backs in Linux created significant doubt and discouragement that hung as a shadow over the Linux business. It is important to note that there was no looming IPO opportunity in Linux. Red Hat was experiencing some success but it was predominantly among college students and on the fringe of business. No one was prepared to go public. Bryan was increasingly uneasy about the debt and wanted no more to do with Linux so in September of 1998, we decided to split up the DR DOS and Linux businesses to provide more focus and to isolate the suit into a holding company, Caldera, Inc. Caldera Systems was formed and I took over the responsibility for the Linux business and I began to build an executive team. Unfortunately, Bryan insisted that the DR DOS business had nothing to do with the 16 million of debt so he refused to accept any of the responsibility. He also insisted that his company was not going to have anything to do with Linux. Bryan owned over 10% of Caldera, Inc. so he had much more leverage with the board than Caldera Systems did. Caldera Systems felt strongly that Linux was on the verge of success. Our team believed that we could be successful. When Canopy offered to convert the debt into equity, we all agreed to move forward, but it had some personal consequences for the founding shareholders. The value of our stock went up to a dollar fifteen and taxes were due if you wanted to have founders stock in Caldera Systems. Those who choose to go with Caldera Systems could not move their stock over without incurring a tax liability. Most of us had been working at Caldera for several years and just could not afford the tax so we were not able to have much ownership in Caldera Systems. This proved to be a mistake as we were unable to have much influence on the board when it was needed, but the team was willing to make the sacrifice and took the leap of faith.

The eternal atmosphere at Caldera was very difficult. Because of internal strife, development on Linux had all but ceased and sales had dropped off. I greatly appreciate the following individuals for sticking with it and really putting forth a significant effort to produce our next product.

James Banks Member Technical Staff

David Brown Technical Support

Mark Carpenter Senior Support Engineer

Chris Clark Member Technical Staff

Scott Countryman Manager, Retail Sales

Stan Covington Member Technical Staff

Matt Dietz Manager, Customer Service

Steve Fidler Product Manager, Linux

Walt Hammond Manager, Operations

Don Hanson Director, OpenLinux Sales

Wilson Lee Inside Accounts Manager, Linux

Lynn Nielson Director, OpenLinux Engineering

Ed Orcutt Manager, Professional Services

Erik Ratcliffe Manager, Technical Serives

Rolando Rubalcava Associate Test Engineer

Allan Smart Director, Technical Support & Cusotmer Services

Bryan Stanley Channel Marketing Creative Manager

Dean Taylor Director, Business Development

Stephanie Teuscher Administrative Assistant, Linux

Debi Thompson Manager, Worldwide Resellers

Nick Wells Director, OpenLinux Marketing

Bart Whiteley Associate Test Engineer

Mart Withers Technical Writer

Ralf Flaxa Director, Engineering

Olaf Kirch Engineer

Joachim Plack Engineer

Roger Pook Senior Support Engineer

Stefan Probst Engineer

Raymond Will Engineer

The efforts of these individuals were invaluable in keeping Caldera going through these dark times. Caldera was very focused on internal issues at a critical when our competitors were getting investments from major players in preparation for going public. Caldera has always been focused on delivering Linux to the business customer. We knew the commercial customer needed products not technology. A complete solution required service, support, must be easy to use and deploy and interoperate with existing business infrastructure. In business, nothing is a revolution; it’s all about evolution. In spite of the set backs, the now Caldera Systems believed in itself and in partnering. A key lesson that I learned from these failed business relationships and the internal strife that resulted, was that adversity often brings about the circumstances that are necessary to accomplish the goal. There is a lot of truth to the following parable someone sent me in an email:

A little bird was flying south for the winter. It was so cold the bird froze and fell to the ground in a large field. While it was lying there, a cow came by and dropped some dung on it. As the frozen bird lay there in the pile of cow dung, it began to realize how warm it was. The dung was actually thawing him out! He lay there all warm and happy, and soon began to sing for joy. A passing cat heard the bird singing and came to investigate. Following the sound, the cat discovered the bird under the pile of cow dung, and promptly dug him out and ate him.

Management Lesson?

1) Not everyone who dumps on you is your enemy.

2) Not everyone who gets you out of bad situation is your friend.

3) And when you’re in deep, it’s best to keep your mouth shut!

While humorous, this parable is also true. We often view adversity as bad and those who treat us poorly, as we suppose, to be our enemies. More often than not, adversity creates the necessary environment for change to happen and those who treat us poorly, either professionally or personally, help us to face, accept or embrace change. Adversity is the mother of innovation and often forces choices by us and others that facilitate the doors to open and the new, often more correct path to emerge. Adversity can not be seen as failure or something to be avoided. The only real path to success is straight through it.

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