A strange Vista

27 July 2005

When Microsoft announced that it would give the name 'Vista' to its forthcoming version of Windows that had, up to then, been referred to under its codename of Longhorn, it did not take long for people to spot that a nearby company was using the same name.

The Seattle Times reported the comments of Vista's founder John Wall. "We're going to consider our options and talk to them," said Wall.

Wall is better known as the founder of PC-to-mainframe comms company Wall Data. He resigned from the company in 1999, shortly before it was sold to NetManage after Wall Data started to rack up heavy losses. Wall founded Community IQ, which would do business as Vista.com, in 1999. Vista has kept a low profile since then and the name would not have meant much to a lot of people. But its role in a curious set of dealings with SCO meant that the name Vista rang more than a few bells when I saw the Seattle Times story. SCO is not famed for its generosity but seemed to make an exception in the case of John Wall and Vista during 2002 and 2003.

Back in the days when SCO was called Caldera, August 2002, the company that would become the Linux community's bete noire decided to buy a licence to "web services solutions" from Vista. An exclusive licence no less. However, rather than off-the-shelf software, Vista's main business was, and still is, turnkey web hosting for small businesses rather than software. The company had a deal with Yellow Pages company YP.net to provide web hosting for some 250 of YP's customers and Vista's own site lists a smattering of small businesses that have their sites built and operated by Vista.

The deal between SCO and Vista would see the creation of the SCObiz unit, designed to give SCO's resellers a way of providing their small-business customers a quick way of building and running websites. SCObiz was not a runaway success.

For this licence, SCO forked over $100 000 in advance royalties and another $250 000 as a way of guaranteeing that SCO would be able to buy more than 3 million Vista shares for $500 000. At the same time, Wall provided SCO with a bond worth $1m in exchange for 800 000 SCO shares and $100 000 in cash. Vista was meant to pay back the $1m in mid-August 2003 plus 8 per cent interest. If SCO decided to take shares instead, it would wind up with 20 per cent of Vista.

In January 2003, SCO made good on its promise to buy the 3 million shares and paid over the remainder of the $500 000 . So, by this time, SCO had provided $700 000 in cash and 800 000 SCO shares, with about a 10 per cent stake in a startup to show for it. For his part, Wall had 6.5 per cent of SCO's shares, making him the second largest shareholder in SCO, after VC firm Canopy Group. At the same time, SCO signed a deal that would provide it with 70 per cent of Vista's shares in exchange for 2.5 million SCO shares. If SCO converted the existing $1m bond and fulfilled that deal, it would have wound up as the owner and sole shareholder in Vista.

The same month, Wall signed an IOU in exchange for $100 000 in cash. Again, it bore 8 per cent interest and could be converted into Vista stock: another 5 per cent. So, SCO had managed to sign deals that would give it 105 per cent of Vista, in theory.

Yet, SCO provided more cash and, in the meantime, filed an S3 document with the SEC that announced that Wall would be selling his 800 000 shares. At the time the S3 was filed, the shares were worth $1.28. They would rise to more than $10 after the company announced its lawsuit against IBM.

In April, SCO extended the payment date for the January IOU to the end of that month and provided another $100 000 for a second IOU, with the same terms as the first, also due at the end of April. By this time, SCO had paid $900 000 in folding stuff and had bought rights to 110 per cent of Vista. By the end of July, however, both of those IOUs were still outstanding and were, according to SCO's 10Q filing with the SEC for its third quarter of 2003, "in technical default".

By September 2003, SCO had decided it was time to call it quits. The company "restructured" its deal with Vista. Although Wall had registered to sell all his shares earlier that year, it seems he was able to return 100 000 shares to SCO in exchange for the bond and two IOUs. SCO cancelled the accrued interest that had built up and wrote off the deal to the value of $250 000.

In 2004, the CFO who was in place while these deals were done moved to the position of vice-president of corporate development before retiring later the same year. But he didn't stay retired for long. As well as setting up an investment firm called BayHill Group, Bob Bench got another CFO position...at John Wall's Vista.

Vista remains privately owned although the company signed a deal with an small oil and gas company called Source Energy earlier this year. Under the deal, Source would buy Vista, with the Vista management taking over the running of Source. As Source is a company that trades its shares over the counter, it would give Vista a position as a public rather than a private company without the pain of doing an initial public offering. The deal has, as yet, not been consummated. But I can see Vista's name popping up again in SEC filings sometime soon, and not just because Wall might be having a chat with Microsoft.