nCipher Scoops Up NeoScale

nCipher has acquired the assets of NeoScale Systems after the storage security vendor wound down operations.

nCipher, a key management specialist, paid $1.95 million for most of the intellectual property and assets of NeoScale. NCipher picked up NeoScale’s CryptoStor tape encryption product and KeyVault key management technology, but did not acquire the company’s disk encryption technology.

Richard Moulds, nCipher’s vice president of marketing, said the tape business was the bulk of NeoScale’s sales.

Storage security vendors have faced stiffer competition in the last few years, as data breaches and lost data tapes have given data security issues a higher profile, but pushed disk and tape vendors to offer greater security, including EMC’s acquisition of RSA and the inclusion of encryption in LTO-4. Decru timed its exit well, selling to Network Appliance for $272 million, but Kasten Chase ceased operations when its security business didn’t ramp up fast enough.

Asked if there is still room in the market for standalone storage security vendors, Enterprise Strategy Group security analyst Jon Oltsik said, “there is room in the short term, but you need a hybrid strategy that includes key management and integration of multiple encryption technologies.”

Oltsik said he considers CipherMax the best-positioned standalone storage security vendor at the moment.

Moulds said NeoScale had “a healthy product line and healthy revenues and healthy growth.” Still, the company wound down operations in the last couple of weeks after failing to secure additional financing.

nCipher will retain 10 or so key NeoScale employees, along with the company’s Milpitas, Calif., office. nCipher is based in the UK, with its commercial base in Stoneham, Mass.

Moulds said nCipher plans to retain the CryptoStor brand and tape product, while the KeyVault technology will be used to enhance nCipher’s keyAuthority enterprise key management product.

Moulds said the biggest challenge for data security and encryption is key management. “If you lose the keys, you’ve got a big problem on your hands,” he said. Managing keys from different vendors is central to the company’s strategy.

nCipher also plans to work with NeoScale’s channel and OEM partners and 300 or so customers to expand its business.

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