When EMC decides to move into a market, it doesn’t fool around.
The acquisitive storage giant announced late Thursday that it will acquire RSA Security for about $2.1 billion, just hours after news broke that EMC and at least one other bidder were in negotiations to buy RSA for at least $1.8 billion.
EMC has been pledging since last year to make data security a bigger priority, and the company unveiled the outline of a security strategy in April.
EMC said the acquisition adds identity and access management solutions and encryption and key management software to EMC’s information-centric security portfolio. The acquisition is expected to be completed late in the third quarter or early in the fourth quarter.
In a statement, EMC Chairman, President and CEO Joe Tucci said, “Information security is a top priority among executives around the world, and it has become an inseparable attribute of information management. Businesses can’t secure what they don’t manage, and when it comes to securing information, that means simply two things — managing the data and managing access to the data.
“EMC is the leading provider of information management solutions,” said Tucci. “Bringing RSA into the fold provides EMC with industry-leading identity and access management technologies and best-in-class encryption and key management software to help EMC deliver information lifecycle management (ILM) securely.”
Tucci said the acquisition “signals a fundamental change in the landscape of the security market. EMC is 100% committed to applying the resources required to continue to expand RSA’s leading market share while also tightly integrating their technology with EMC’s products to bring customers the best information-centric security portfolio available.”
With high-profile data breaches and lost data tapes sparking demand for greater storage security, EMC was expected to move aggressively into the security space, but analysts on a conference call following the acquisition questioned the steep 40% premium EMC will pay for RSA, more than five times the company’s sales.
But Tucci defended the price, saying, “This was a very competitive situation.”
Tucci said on the call that “the technology company that seamlessly integrates information storage with information management with information protection with information security, and centrally manages and orchestrates this information infrastructure, will be a huge winner in the technology marketplace, and the technology company that’s going to do that is EMC.”
EMC said RSA’s authentication and access management capabilities “will build on EMC’s foundation of inherently secure products and processes. RSA’s encryption and key management technology will be central to EMC’s strategy to directly protect the information no matter where it resides within or outside of an organization.”
RSA CEO and President Art Coviello said in a statement, “Information security threats are evolving from attacks on the network and the perimeter to attacks on the data itself. These attacks are designed to obtain information, intellectual property and other information that can be exploited for criminal gain. For this reason, security must be an integral part of the information infrastructure, transparently allowing authorized users to easily get access to information. The combination of RSA’s leading security technology coupled with EMC’s best-in-class information infrastructure and financial resources will accelerate the integration of security into the information infrastructure.”
Greg Schulz, founder and senior analyst at StorageIO, said the acquisition “makes sense to complement the existing EMC information and data management solution lineup and to address holistic data protection and security.”
Baird analyst Daniel Renouard said that although the price for RSA was steep, the acquisition “fills [a] meaningful technology gap” and “makes strategic sense given increasing overlap between storage and security.”
Renouard said EMC has $7 billion in cash and generates $1.5 billion a year in free cash, so the acquisition “does not stretch finances.” RSA represents 3% of EMC’s revenue, he said.
Jon Oltsik, senior analyst for information security at the Enterprise Strategy Group, said the acquisition “does plug holes in access control and administration. It also gives EMC the key management technology it was looking for.”
So will storage users have to pay extra for security? “Some security will come free, but there is plenty of money to be made with this deal,” Oltsik said.
EMC said it expects the acquisition to dilute earnings by 3 cents a share in 2007 and will not have a material impact on earnings per share in 2008.
Upon completion of the acquisition, RSA will operate as EMC’s Information Security Division, headquartered in Bedford, Mass. Coviello will become an Executive Vice President of EMC and President of the division.
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