NSO Group: Here We Go Again

June 1, 2022

That Israeli outfit NSO Group has nailed the art of publicity.  Positive PR? Nope. Not so positive? Yep. But as a wit allegedly said, “Any publicity is good publicity?”

Maybe.

NSO’s Cash Dilemma: Miss Debt Repayment or Sell to Risky Customers” tries to explain some of NSO Group’s alleged activities. [This Financial Times’ article resides behind a paywall.] The write up states:

Hulio [one of NSO Group’s senior managers] said there was one option to bring in some cash quickly enough to pay salaries and service debt: reassemble a defunct internal committee and approve sales to customers flagged as “elevated risk” during due diligence.

Why is this allegation of money pressures sparking consideration of sales to nation states which may present some challenges to NSO Group, its managers and staff, and its investors?

My thought is that money must be followed.

A pursuit of money sparked some actions at other search and content processing centric companies. I mentioned this idea in my recent essay “Autonomy Business Details: Are These Relevant to Search- and Content Processing Type Outfits Today?

The decision to generate revenues seems to open the door for many ideas. Some of these are okay; for example, selling more licenses to governments of NATO countries. A few may have been less well received; for example, relaxing the criteria used to determine what countries could license Israeli surveillance innovations.

US sanctions and the PR cyclone have created a number of business challenges for NSO Group. The path forward according to the Financial Times’ article looks like this:

In recent months, Hulio has come up with a new plan dubbed the “phoenix plan” by company insiders. The idea is to split NSO’s greatest assets from its greatest liabilities — this meant separating the code behind Pegasus and company engineers who are highly paid graduates of Israel’s elite military intelligence units, from the clients that have drawn the ire of the US and human rights groups. Hulio and a group of creditors hope that by spinning out a new entity that houses the code and engineers, it can sidestep the commerce department’s blacklist, especially if a new owner were a top US defence contractor.

What’s the outlook for NSO Group? Three possibilities strike me:

  1. Other companies will fill the gap. Just as Cellebrite has to deal with an upstart iPhone penetration solution, NSO Group will find that its methods provide a springboard to other innovators.
  2. NSO Group gets folded into a government agency. One can be sure it will not be a part of a nation state with negative thoughts about Israel.
  3. NSO Group folds its tent, and certain senior managers and engineers set up another company and move on.

I want to mention that the reason there is a glass ceiling for revenues from intelware and policeware is that there are a finite number of customers for the number of products and services on offer. Once that glass ceiling bumps the head of senior managers and stakeholders, then what I see as “drastic” actions kick in. Are Palantir’s comments about nuclear war and example of this?

I am certain about one thing: NSO Group is one of the most recognized brands of intelware in the world.

Stephen E Arnold, June 1, 2022

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