Dell Files Paperwork to Take SecureWorks Public

By Jeffrey Burt  |  Posted 2015-12-18 Print this article Print
tech business

The move reportedly would help Dell reduce the huge debt that it will take on when it buys EMC for $67 billion next year.

Dell officials plan to take the company's cyber-security division SecureWorks public next year.

The company this week filed paperwork with the Securities and Exchange Commission (SEC) notifying regulators of the plan to take SecureWorks private. Dell officials didn't say how much SecureWorks expected to raise—saying only $100 million, which reportedly is usually used as a placeholder figure—or what the initial asking price will be.

Dell bought SecureWorks for $612 million in 2011 as part of its larger strategy to become a provider of enterprise IT solutions and services. That includes building up its security capabilities through acquisitions, such as SecureWorks, SonicWall and Credant Technologies, the latter two bought in 2012.

The decision to take SecureWorks public also comes in the wake of Dell's bid to buy storage giant EMC and its collection of companies—including VMware, VCE, Pivotal and RSA—for $67 billion. Officials with Dell—which went private in 2013 after CEO Michael Dell and financial backer Silver Lake Partners bought the company for $25 billion—expect to take on more than $49 billion in debt to acquire EMC, and have been making moves to reduce that number, including reportedly by selling some assets.

Those assets could include SonicWall, software unit Quest and the services businesses based on Dell's $3.9 billion acquisition of Perot Systems in 2009.

SecureWorks' initial public offering (IPO) reportedly also will help Dell reduce the debt from the EMC deal, which is expected to close later next year. After the deal with Dell was announced, EMC officials reportedly started mulling moving up their own plans to sell about 20 percent of Pivotal, its cloud computing businesses, in an IPO in early 2016. The move would let EMC—or Dell—still control Pivotal, in a fashion similar to EMC's relationship with VMware, of which it owns about 80 percent. EMC CEO Joe Tucci has been considering the Pivotal move for a while, but had not set a timetable.

Michael Dell has said that he plans to pay down as much of the debt from the EMC deal as possible in the first 18 to 24 months after the deal closes.

In the paperwork filed with the SEC, Dell and SecureWorks officials said the cyber-security unit has more than 4,100 customers in 61 countries that are using the unit's information security offerings that are designed to protect them against cyber-attacks.

"Our solutions enable organizations to fortify their cyber defenses to prevent security breaches, detect malicious activity in real time, prioritize and respond rapidly to security breaches and predict emerging threats," the officials wrote in the filing. "The solutions leverage our proprietary technologies, processes and extensive expertise in the information security industry which we have developed over 16 years of operations."

According to the filing, SecureWorks has seen its revenue grow significantly over the past several years. In its fiscal year 2013, sales hit $172.8 million, then jumped 19 percent the following year to $205.8 million. In fiscal year 2015, it grew another 27 percent, to $262.1 million.

However, the business unit also suffered net losses during those years. SecureWorks lost $41.5 million in FY2013, $44.5 million the following year and $38.5 million in the last fiscal year. In the first nine months of FY2016, the Dell subsidiary has lost $57.5 million, officials said. During the same nine months, SecureWorks generated $245.4 million in revenue.


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