Scale8 Scales Down

Scale8 Inc. is looking to sell its intellectual property after the startup's VCs decided to pull the plug, sources tell Byte and Switch.

Multiple industry sources say Scale8, which sells distributed NAS systems and software, has cut back its headcount -- bumping many employees out of work in a layoff earlier this month. The company is now said to be in the process of trying to sell off its assets, but has evidently had little traction so far.

A source close to the company says Scale8 has not shut its doors, but acknowledges that it's currently pursuing "strategic options."

We tried to contact several executives at San Francisco-based Scale8, including president and CEO Robert "Bo" Ewald, but none responded to email or phone messages.

Recently, former Scale8 COO Patrick Rogers left the company to join Network Appliance Inc. (Nasdaq: NTAP). Bob Thomas, formerly senior director of marketing, is also gone."I know they're losing people, because they're knocking on my door," says an executive at a stealth-mode storage software company, who requested anonymity. [Ed. note: Anonymous and in stealth? How much more secretive can you get?!]

Scale8, founded in 1999, has received a total of $55 million in funding to date, most recently with a $23 million third round in August 2001. Scale8's investors include Oak Investment Partners, Star Ventures, InterWest Partners, CenterPoint Ventures, and Crown Advisors (see Scale Eight Scores $23M).

The company started life in 1999 as a storage service provider (SSP), with the idea that it would host vast quantities of data for media companies and other Fortune 500 firms using its proprietary distributed file-sharing software. In March 2002, Scale8 launched an attempt to sell a software version of its distributed file system service. Then, a year later, it came out with a hardware-based NAS appliance, evidently desperate to scare up some revenue (see Scale Eight Smells the Software and Scale8 Turns to NAS Hardware).

Since modifying its business model to be a more product-focused company, says one industry consultant, "Spinnaker Networks Inc. is rumored to be kicking their butts, but NetApp must be also."

Scale8 has most likely been struggling because its product offerings are plagued with shortfalls similar to those of Zambeel, a distributed NAS startup which officially shut its doors last month. Several ex-Zambeelians are now attempting to resurrect that company's technology with a software-oriented company dubbed StorAD Inc. (see Zambeel Znuffed Out and Zambeelians Reemerge at StorAD).Like Zambeel, Scale8 supports only the Unix Network File System (NFS) protocol -- not the Common Internet File System (CIFS) protocol, which is used in Windows environments. Moreover, the starting price point for Scale8's hardware is $105,000 for a 6-Tbyte system, a substantial commitment for any prospective customer.

Here's a thought: Maybe Scale8 and Zambeel can merge their resources at this point and become Scambeel? Well, maybe not.

Todd Spangler, US Editor, Byte and Switch