Demanding that Linux users license their systems or run the risk of prosecution, SCO has set the price for a single CPU Linux server licence at $1,399 (£865).

But analysts are unimpressed by SCO's attempt to create an air of urgency.

SCO's Intellectual Property Licence applies to implementations of the Linux 2.4 and 2.5 kernels.

Initially priced at a reduced rate of $699 per single CPU, that price ends in October 2003 after which it reaches $1,399 per single CPU.

Multiple CPU systems will be graded at a similar per-CPU incremental premium, according to Chris Sontag, senior vice president and general manager of the company's SCO Source division.

SCO believes that the new licence applies to nearly 2.5 million servers in thousands of companies worldwide. It is also insisting that it will sue Linux users that do not pay up.

"We have the ability to go to users with lawsuits and we will if we have to," said Darl McBride, president and chief executive at SCO.

But analysts maintain that the licensing scheme has been severely weakened by Red Hat's lawsuit against the company, filed on Monday. Red Hat's action should determine whether SCO's claims have any merit.

"The resolution of the Red Hat lawsuit is the next milestone for users to pay attention to before they rush into any licensing agreements with SCO," said George Weiss, research director at Gartner.

SCO said that it expects the case to come to court a few months after its pending case against IBM, which is now set for an April 2005 hearing.

SCO insists that the introduction of user licences has been forced on it by IBM's and Red Hat's refusal to license its intellectual property and thereby indemnify their own Linux users.

"Both companies have shifted liability to the customer and then taunted us to sue them. So that's all they have left us to play with," said McBride.

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