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Filed by: The Santa Cruz Operation, Inc.
Pursuant to Rule 425 Under the Securities
Act of 1933 And Deemed Filed Pursuant to
Rule 14a-12 Under the Securities
Exchange Act of 1934
Subject Company: The Santa Cruz
Operation, Inc.
(Commission File No. 000-21484)
Our Q&A session today contains historical information and forward
looking information. Numerous factors affect the operating results of either
Caldera Systems, Inc. (Caldera) or The Santa Cruz Operation, Inc. (SCO) and
could cause either companies' actual results to differ materially from those
indicated in this discussion or any other forward looking statements made by, or
on behalf of, the companies and there can be no assurance that future results
will meet expectations. These risks include, but are not limited to, those set
forth in SCO's Annual Report on Form 10-K for the fiscal year ended September
30, 1999 filed with the Securities and Exchange Commission on December 28, 1999
and Caldera's and SCO's quarterly reports on Form 10-Q filed with the SEC.
In addition, you should be aware that this call is being taped for
playback.
Announcement Q&A
Corporate Questions
1. What was announced?
Caldera Systems, Inc. has reached a definitive agreement to acquire the
assets of the Server Software Division (SSD), and Professional Services
Division of The Santa Cruz Operation, Inc. (SCO). A new company, Caldera,
Inc., will be formed, combining the assets of Caldera Systems with the
assets acquired from SCO.
2. What part of the Server Software Division is included in the deal?
Employees, the UNIX and related intellectual properties, including UnixWare,
facilities, legal entities, customer relationships, channel relationships
and all products except for OpenServer intellectual property rights (IP).
Some of the Tarantella support personnel will move to the Tarantella
Division. Caldera, Inc. will act as SCO's exclusive sales representative
with respect to sales and support of SCO OpenServer, and will receive
commissions for such service. Caldera, Inc. will have exclusive distribution
rights of SCO OpenServer.
3. What part of the Professional Services Division is included in the deal?
Employees, facilities, customer relationships and contracts. Professional
Services will also continue its relationships with Tarantella, Inc. by
signing a strategic relationship agreement to be a preferred professional
services provider for Tarantella.
4. Who will assume the leadership positions in Caldera, Inc.?
Ransom Love will serve as CEO, David McCrabb, current President of the SCO
Server Division will serve as President and Chief Operating Officer, Jim
Wilt will be the President of the Caldera, Inc. Services Division. Doug
Michels, CEO of The Santa Cruz Operation, will serve as a member of Caldera,
Inc.'s board of directors and will retain his role as CEO of SCO.
5. How does this affect The Santa Cruz Operation, Inc. (SCO)?
SCO will continue to develop, market and sell Tarantella and the client
integration products. SCO will also keep SCO OpenServer. The new company
will have exclusive distribution rights for SCO OpenServer, providing an
ongoing revenue stream to SCO. SCO will maintain investments in Rainmaker
and Linuxmall, etc. From this acquisition, SCO is receiving the following:
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. $7 million in cash
. 28% of Caldera, Inc, which is estimated to be an aggregate of
approximately 17.54 million shares of Caldera stock (including
approximately 2 million shares reserved for employee options assumed by
Caldera for options currently held by SCO employees joining Caldera)
. In conjunction with the acquisition, The Canopy Group, Inc., a major
stockholder of Caldera Systems, Inc., has agreed to loan $18 million to
SCO
In addition, The Santa Cruz Operation, Inc. will continue to own:
. The Tarantella Division and its subsidiaries Tarantella, Inc. &
Tarantella Ltd. and including the Tarantella and Vision2K family of
products .
. Its cash and investment holdings (e.g. in Rainmaker, Linuxmall, etc.)
. The OpenServer intellectual property (Caldera, Inc., will have exclusive
distribution rights for SCO OpenServer, providing an ongoing revenue
stream to The Santa Cruz Operation, Inc.) Revenues for SCO OpenServer
were $11.1 Million in Q3 of FY2000. As part of the deal, SCO will net
approximately 65% of the SCO OpenServer revenue.
6. Why is SCO doing this?
. This provides an opportunity to take advantage of the synergy between
UNIX and Linux by merging the assets of the SCO Server Software and
Professional Services Divisions into a new company that has the
resources, positioning, and vision to drive the open computing platform
business for future growth.
. We believe the combined resources can succeed in a way that the
individual organizations could not achieve on their own. It also provides
an opportunity for employees of the SCO Server Software and Professional
Services Divisions to see their goals expanded and achieved in a more
powerful environment than ever before.
. The proceeds from this acquisition and ongoing SCO OpenServer net
proceeds give The Santa Cruz Operation, Inc. additional capital with
which to fund the growth we foresee in Tarantella. This growth is fueled
by increasing business use of the Internet, by the continued
attractiveness of thin-client computing and by the accelerating adoption
of the Application Service Provider (ASP) business model.
. The management of the Santa Cruz Operation, Inc. wishes to focus its
attention on growing Tarantella for success.
7. How was this process initiated?
Natural outgrowth of long term business relationship and combined efforts
between the companies.
8. When does the acquisition become final and where will the new company be
headquartered?
We estimate that the process for required governmental and shareholder
approval will be complete in October. The new company will be headquartered
in Orem, UT., with locations worldwide.
9. Will there be layoffs?
Both Caldera, Inc. and SCO are committed to meeting their respective
financial and strategic goals. Necessary decisions will be made as the
companies move through this process. The companies anticipate resolving
organizational issues in approximately 30 days.
10. What does this mean for the Tarantella Division?
The Tarantella Division is key to the future success of SCO. By separating
the Tarantella Division from the Server Software and Professional Services
Divisions, Tarantella now has a clear currency that can be more
appropriately valued by public markets, and leveraged for alternate
financial strategies.
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11. Are the Caldera Systems, Inc. and SCO Server Software Division and
Professional Services Division sales forces combining? What are the plans
for training that force?
Caldera, Inc., representing the combination of Caldera Systems and SCO's
Server Software and Professional Services Divisions, will be one company in
every way. Following a normal integration period, there will be no
unresolved issues regarding "theirs" and "ours." Given that unity, there
will continue to be a great need for a highly skilled, well-trained sales
force that is conversant in the full range of product offerings. Cross-
training will be implemented almost immediately to fully utilize the skills
and resources of professionals already in place within the company. The
dedicated services sales force will be part of the Caldera Services
Division.
12. How does this help Caldera, Inc. competitively?
Caldera, Inc. will be able to make the most of the synergies between the two
existing companies, resulting in:
. World's largest channel,
. Increased breadth of product options and accelerate Linux technology
plans,
. OEM's can now get scalability of product, professional consulting and
engineering services and instant global marketplace,
. World-class global services and support infrastructure
13. What will happen to Forum2000?
Caldera will now join SCO as a co-sponsor of Forum2000.
Stock/Shareholder Questions
14. What is the structure and value of The Santa Cruz Operation moving forward?
(See 4 and 5)
. Focusing SCO's attention to Tarantella alone will allow the market to
place a more realistic value on the Tarantella business.
. Additionally, Caldera Systems, Inc. and the SCO Server Software and
Professional Services Divisions combined will create an organization with
a much higher market value than either entity on its own, in which The
Santa Cruz Operation will be a major shareholder.
. The Santa Cruz Operation will continue to receive an income stream from
the sales of SCO OpenServer through Caldera, Inc., Inc. and will continue
to hold a portfolio of investments in a range of high-technology
ventures.
15. Will there be a charge against earnings for this acquisition?
Yes.
Employee-related Questions
16. What does this mean for the acquired employees of SCO?
All employees of Caldera Systems, Inc. and acquired SCO Divisions will
receive Caldera, Inc. stock options with comparable benefits and
compensation.
17. What is the schedule for defining the new organization?
The intent of both companies is to have an initial framework completed in
approximately one month.
18. Who is on the Integration Team?
The Integration Team will be drawn up and announced within the next few
days.
19. Where do employees of the current SCO G&A organization fit?
The apportionment of G&A employees between Caldera and SCO will be defined
as part of the overall organizational structure. Your involvement will be
required as we work through the
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integration process.
20. What will happen to the SCO Cafeteria?
Both companies will continue to use the SCO Cafeteria in Santa Cruz. Ingrid
and her staff will continue to produce their tasty creations. Unfortunately,
there is no truth to the rumors about a new drive-through option!
Product Questions
21. What does this mean for the Server Software Division and Linux?
The new company will take the proposed value-add from the Server Software
Division and incorporate this with the already successful Linux products
from Caldera Systems, Inc.
22. What products are involved in the sale?
All Server Software Division products except SCO OpenServer, for which
Caldera, Inc. will have exclusive development and distribution rights. The
Santa Cruz Operation will fund Caldera, Inc. to develop for SCO OpenServer.
23. Will the new company promote both Linux and UNIX products?
The new company will focus on providing an Open Internet Platform (OIP) for
eSolution Providers (eSPs.) Open Internet Platforms will be based on Linux,
UNIX and Monterey 64.
24. What does this mean for Project Monterey?
Caldera, Inc. will carry the responsibilities of Project Monterey forward
though the development of comprehensive commercial grade software. Project
Monterey will be one of the products offered as part of the Open Internet
Platform.
25. Is the new company planning to participate in the IA64 Linux Project?
Yes. Both Caldera Systems and the Server Software Division have participated
in the development of the IA64 Linux Project and will continue to
collaborate as Caldera, Inc.
26. What happens to ownership of the UNIX technologies ?
With the exception of SCO OpenServer, the UNIX technologies move to Caldera,
Inc.
27. What happens to UnixWare 7 NonStop clusters and other clustering
technologies?
UnixWare 7 NonStop clusters will become a flagship product of Caldera, Inc.
and the company is evaluating extending these clustering technologies to
Linux and the entire Open Internet Platform.
28. What will happen to SCO OpenServer?
Caldera, Inc. is fully committed to servicing and supporting the SCO
OpenServer customer base and to helping these customers gain easy access to
the Open Internet Platform initiative. Caldera, Inc. will have exclusive
distribution rights for the SCO OpenServer product line, and will receive a
sales commission and reimbursement for SCO OpenServer engineering and
marketing expenses. SCO retains the intellectual properties and the ongoing
revenue stream for the SCO OpenServer product line and will fund future
product development by Caldera, Inc.
29. How will the products of both companies be integrated?
We will integrate all products as appropriate based on Caldera, Inc.'s focus
of common application, development and management.
30. Is there a pricing structure defined for new offerings?
Existing prices for existing products will remain in place. New pricing will
be implemented with the launch of new products.
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31. How will this affect the Linux industry/community?
Caldera, Inc. intends to unify the technologies of Linux and UNIX enhancing
the attractiveness to Linux and business customers. In addition, Caldera,
Inc. will. provide open access to those technologies, greatly benefiting the
Linux community and industry.
Customer-related Questions
32. How will customers benefit from the announcement?
For the first time, customers will be able to purchase both open system and
open source solutions from a single, trusted supplier. Caldera, Inc. will
become the number one provider of Open Internet Software Service.
Additionally, Caldera, Inc. will be the only Linux company with a quality,
worldwide infrastructure, including development, support, professional
services, consulting, ISV/IHV and channel partners.
33. What about Tarantella customers serviced through the SCO server channel?
Caldera, Inc. recently signed a distribution agreement with Tarantella, Inc.
for Tarantella on OpenLinux. This agreement will carry over to include
Tarantella for UnixWare and SCO OpenServer. Tarantella customers will
continue to receive technical support from Caldera, Inc. Tarantella will
contract with Caldera Inc.'s services division to provide this support.
34. What is the expected response of your OEMs and ISVs to this acquisition?
Our partners have been briefed on the concept and have responded favorably.
35. What about Tarantella customers serviced through the SCO Professional
Services?
All current agreements will continue to be serviced by the Caldera, Inc.
Professional Services Division. Additionally, the new division will sign a
strategic relationship agreement with Tarantella, Inc. to be a preferred
services provider for Tarantella.
36. Why would ISVs port to both OpenLinux & UnixWare?
The acquisition creates a worldwide infrastructure to support and integrate
services for open access, as well as worldwide consulting for customization
and the best overall scalable platform from the thinnest clients to
enterprise clustering.
37. Who are Caldera, Inc.'s competitors?
We intend to be the #1 provider of Open Internet Platform Software and
Services. Our competition is any company in that space.
Additional Information and Where to Find It: It is expected that Caldera will
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file a Registration Statement on SEC Form S-4 and Caldera and SCO will file a
Joint Proxy Statement/Prospectus with the SEC in connection with the
Acquisition, and that Caldera and SCO will mail a Joint Proxy
Statement/Prospectus to stockholders of Caldera and SCO containing information
about the Acquisition. Investors and security holders are urged to read the
Registration Statement and the Joint Proxy Statement/Prospectus carefully when
they are available. The Registration Statement and the Joint Proxy
Statement/Prospectus will contain important information about Caldera, SCO, the
Acquisition, the persons soliciting proxies relating to the Acquisition, their
interests in the Acquisition, and related matters. Investors and security
holders will be able to obtain free copies of these documents through the
website maintained by the SEC at http://www.sec.gov. Free copies of the Joint
Proxy Statement/Prospectus and these other documents may also be obtained from
Caldera by directing a request through the Investors Relations portion of
Caldera's Web site at http://www.caldera.com or by mail to Caldera Systems,
Inc., 240 West Center Street, Orem, Utah 84057, attention: Investor Relations,
telephone (801) 765-4999; or from SCO by directing a request through the
Investors Relations portion of SCO's Web site at
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http://www.sco.com or by mail to The Santa Cruz Operation, Inc., 425 Encinal
Street, Santa Cruz, California 95061, attention: Investor Relations, telephone
(831) 427-7399.
In addition to the Registration Statement and the Joint Proxy
Statement/Prospectus, Caldera and SCO file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information filed by Caldera or SCO at the
SEC public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or
at any of the SEC's other public reference rooms in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms.
Caldera's and SCO's filings with the SEC are also available to the public from
commercial document-retrieval services and at the Web site maintained by the SEC
at http://www.sec.gov.
