Is Sliding Encryption Vendor NeoScale Ripe For EMC Buy?

NeoScale has stopped selling maintenance contracts for its data encryption appliance, effectively killing the line, while exploring "strategic alternatives" in the wake of the bankruptcy of storage VAR MTI, one of its largest solution providers.

That "strategic alternative" could be an acquisition of all or part of the company by storage and security giant EMC, or even Hewlett-Packard, according to former employees.

Neither EMC nor NeoScale would comment about a possible acquisition. An executive still working at NeoScale, who preferred to remain anonymous, did say that the company was exploring strategic alternatives. That phrase is often a euphemism for looking to be acquired.

"Hopefully we'll have some resolution we can talk about soon," the executive said.

EMC has of late been making several acquisitions of both storage and security technology developers.

NeoScale, who's encryption and key management technology was adopted by several solution providers and their customers, has decided to focus more of its R&D on developing its Secure File System, or SFS, technology, according to former employees of the company.

That's a real shame, said solution providers who have found widespread acceptance of NeoScale's technology in their customers looking for ways to ensure compliance with new regulations aimed at ensuring the security of their data.

Gordon Nyquist of Mercury Storage, a Southfield, Mich.-based solution provider, said the NeoScale products were among the best his company has sold.

However, Nyquist said, NeoScale has been doing a disappointing job of communicating with its channel partners. "But we hope to work with them in the future," he said. "A number of clients and resellers are waiting for clear communications. A number of resellers have invested a lot of time and energy in evangelism"

Mark Tuggle, regional sales manager at USI, a Chicago-based solution provider, called NeoScale's technology awesome.

"Everybody we worked with at NeoScale were great people, and their product and support were great," Tuggle said. "We sold quite a bit of their products."

Unfortunately that stopped a couple of weeks ago when NeoScale laid off almost all the people who worked with USI and stopped selling maintenance contracts, Tuggle said.

"A couple of weeks ago, we sold an appliance and it was shipped before we were told we couldn't sell maintenance support," he said. "We told the customer to ship it back. We can't sell product like that."

However, Tuggle said, he has checked, and NeoScale still has technical support available for the appliances.

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