There is growing speculation that EMC may be about to drop $2 billion on software giant RSA in a bold move to bolster its own security story.
RSA, in a statement this morning, confirmed that it is "currently engaged in negotiations with parties regarding a potential strategic transaction" after the New York Times reported that a deal, potentially valued at more than $1.8 billion, may be imminent. Trading in RSA shares was also halted this morning.
The security specialist did not reveal the identities of its suitors and said that no definitive agreement has yet been reached. A prepared statement declared: "There can be no assurance that any agreement will be reached or that a transaction will be consummated."
EMC did not respond to Byte and Switch's requests for comment.
At least one observer, Richard Stiennon, chief research analyst at IT-Harvest, believes EMC could do worse than go after RSA. "I always thought that RSA was an undervalued gem in the security space," he explained. "RSA is everywhere, everyone knows how to use it, it's tried and tested."
If EMC acquires RSA it will get its hands on an extensive array of encryption technologies, as well as the vendor's SecurID authentication offerings. Up until now, EMC has mainly focused its security efforts on back-end systems, although RSA could open the door to the both the consumer market and desktop users. (See RSA Unveils Data Protection, RSA's Master Key Plans, and RSA to Access Mid-Sized Businesses.)
RSA has also been edging closer to the storage market. The vendor recently announced plans to extend its centralized key management software to new areas, such as databases, file systems, and (eventually) mobile devices. Earlier this month, RSA teamed up with Protegrity to integrate its Key Manager software with the latter's encryption offerings. (See RSA's Master Key Plans.)
The other potential bonus, of course, is RSA's 20,000-strong customer base, which includes big names, such as the U.S. Department of Defense, E*Trade Financial, and Barclays Bank in the U.K. EMC would also get its paws on a slew of smaller customers at a time when the storage vendor is pushing more and more of its technology in the direction of SMBs. (See EMC Delivers Insignia to SMBs, EMC Upgrades SMB SANs, Vendors Set Sights on SMB Windfall, and SNW: Small, SAS-sy & Safe.)
Stiennon told Byte and Switch that the jewel in the RSA crown is its strength in the financial sector. "Not only do they have the standard in [authentication] tokens, they also bought a company called Cyota that provides the anti-phishing standard for banks," he said. (See RSA to Acquire Cyota.)
EMC CEO Joe Tucci identified security and virtualization as potential target areas during the firm's recent analyst day, where EMC was urged to boost its security and digital rights management portfolio. (See EMC Nets nLayers, Scopes Security.)
EMC, which has spent $4.5 billion on a slew of acquisitions in just over two-and-a-half years, acquired digital rights management specialist Authentica earlier this year and has forged encryption OEM deals with Decru and Neoscale. (See EMC Acquires Authentica.) Despite these moves, there is a feeling in the market that no single vendor currently offers a silver bullet combining storage and security.
Certainly, security is the main area where users are looking for EMC to beef up its efforts. Of the 322 responses to a recent Byte and Switch poll, some 55 percent said the storage giant should target security for its next acquisition. This area was identified as the biggest gap in EMC's product portfolio. (See Readers Eye EMC's Expansion and EMCs MVP.)
Stiennon feels that a possible EMC/RSA deal could pave the way for some major M&A in the security space. Up until now, he explained, most security acquisitions have been relatively small affairs. "There's a lot of roll-up activity, but not these billion-dollar deals," he said. Symantec, for example, could be a potential target for Cisco, which up to now has been "dabbling in the anti-virus space."
In trading today, shares of RSA rose $3.77 (19.47 percent) to $23.13. EMC's stock dropped 6 cents (0.53 percent) to $11.31.
James Rogers, Senior Editor, Byte and Switch