Encryption appliance vendor NeoScale appears to be in trouble, trouble of the bankruptcy or acquisition-seeking kind.

There are stories that it has suddenly become insolvent. This is due to its largest VAR, MTI, going belly up. It appears that MTI owed $0.8 million to NeoScale went it went into Chapter 11 bankrupty in October this year.

As part of its response to its problems MTI sacked all its service personnel.

NeoScale was an unsecured creditor of MTI and its business execution has been questioned.

NetApp considered buying NeoScale but went for Decru instead a couple of years ago.

The company is said to be exploring 'strategic alternatives' which can mean looking for a buyer. EMC has been suggested as a possible buyer.

If NeoScale is in trouble then this is good news for NetApp's Decru unit which also sells appliances. It's bad news for NeoScale partners such as Bridgehead and Fujitsu Siemens Computers.

However the appliance encryption market is not looking rosy as storage devices get their own encryption facilities co-ordinated by network-wide key management systems. Encryption is going to become a commodity in terms of its widespread use.