EMC Defends Strategic Purchase of RSA

"We've had a small amount of revenue in the security area, but now we think this will be a $500 million business for us within a year—and that it will become eventually a $1 billion business," Tucci said.

Charles King, of Pund-IT, in Hayward, Calif., wrote a special report to clients immediately after the deal was announced.

"From a strategic standpoint, are the two companies a good fit? Overall, yes," King wrote. "Some analyses of the acquisition have drawn parallels between EMC/RSA and Symantec' 2004 acquisition of Veritas, but the fact is that the deals have little in common besides their principals' interests in storage and security. That agreement was really about Symantec's attempts to bolster itself against future competition (i.e. Microsoft) in its core business."

EMC and RSA are both well-known names in the enterprise IT space, King wrote, and share common customers in sectors including banking, finance, health care and government. As a result, the pairing incorporates both "interesting existing synergies and intriguing future opportunities for tactical EMC products and services," he said.

"Over time, we expect EMC to integrate RSA encryption and authentication solutions into its core storage and information management offerings," King said. "In the shorter run, RSA could provide its new parent an entry to potential corporate clients. The former should benefit EMCs existing and future customers, while the latter is likely to set its competitors teeth on edge."

So is this deal simply a practical pairing of two players whose sum will likely be greater than their individual parts?

"In a word, no," King said. "Instead, the RSA acquisition says volumes about EMCs perception of both the evolving IT marketplace and the increasingly critical role of security. Recent headlines concerning the loss of a Veterans Administration employee laptop containing thousands of vets records and new revelations about missing VA back-up tapes are merely the latest episodes in a security melodrama that appears never-ending."

Data with information on more than 26.5 million veterans was stolen. Click here to read more.

"This is an excellent and strong move by EMC," William Hurley, senior analyst of Data Mobility Group, in Portland, Ore., told eWEEK. "RSA is a leading incumbent that has driven standards, has broad market share and a rich portfolio of technologies, many of which are already integrated with EMC's Documentum assets.

"Those who are nay-saying this deal are missing the boat on the connection between information, security and real-time intelligence," Hurley said.

Wall Street's inability to see the value in this and other recent EMC acquisitions is more a statement of that geography's myopia, particularly on the upper floors, than the reality of the needs at street level, Hurley said.

"In fact, it is the CIOs, CSIOs, compliance officers and lawyers of major U.S. and international banks who have been demanding closer technical interoperation between information management and security solutions," Hurley said.

The acquisition of RSA fills a vital role in expanding EMC's presence in the IT security business, said David Hill, a principal with the Mesabi Group in Westwood, Mass.

"Even though everyone realizes that security is important, not everyone realizes how far enterprises still have to go in providing the proper levels of security. EMC has now placed itself as one of the leaders of this key area of information technology," Hill said.

Was $2.1 billion too much to pay for a $310 million (2005 revenues) company?

"Wayne Gretsky said, I skate to where the puck is going to be, not where it is," Hill said. "Security is already—and is going to continue to be—a huge market. Vendors that do it right will be able to differentiate themselves from their competitors.

"So this is a strategic move—skating to where the security puck will be. In a few years all the talk about how high the price was will be forgotten."

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