Dell Considers Spinning Off SecureWorks Business

The company, which went private almost two years ago, reportedly sees an IPO for SecureWorks as a way of generating more capital.

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Dell, which became a private company almost two years ago, may be eyeing a return to the public stage, at least for parts of the company.

Reports continue to circulate that Dell officials are interested in spinning out at least part of its SecureWorks security business—as well as other units—with an eye toward creating a federation business model similar to that at storage giant EMC.

Initial hints at the idea came two months ago, when Brenon Daly, an analyst with The 451 Group, wrote in a post on the firm's blog about rumors of Dell planning to sell a minority stake in SecureWorks in an initial public offering (IPO) later this year. Daly suggested that the money raised through the IPO could be used by SecureWorks to buy other smaller managed security service providers (MSSPs).

"We estimate revenue at SecureWorks at just under $300 [million], with the business running right about breakeven," he wrote. "Assuming it gets a valuation comparable to what has been handed out in recent MSSP transactions, SecureWorks could be valued at roughly $1 [billion]."

More recently, the Atlanta Business Chronicle this week, citing multiple unnamed sources, said SecureWorks could be on its way to an IPO that could bring it more than $1 billion. Dell bought the company in 2011 for $612 million and has made the MSSP a cornerstone of its security portfolio. For Dell, the attraction to spinning off SecureWorks would be the money it could make from a strong stock market and high demand for cyber-security technology.

The sources told the news site that Dell officials are looking to generate more capital for the company. After taking Dell private, CEO Michael Dell was highly critical of the pressure from investors and financial analysts to focus on short-term financial returns rather than long-term goals for the company. As a private company, Dell can be more nimble and make moves that may not show much financial gain initially but will prove beneficial down the road.

"We can focus 100 percent on our customers so we don't have to focus on other things, shareholders, and that allows us to make bold decisions, invest for the long term," Michael Dell told eWEEK soon after the company went private in 2013.

Egon Durban, a member of Dell's board of directors and a managing partner with Silver Lake Partners—a financial backer of Michael Dell when the CEO bought the company for $24.9 billion and took it private—told Fortune recently that Dell executives were considering taking parts of the business public. That could include not only SecureWorks but also the company's Boomi cloud software business, according to the news site.

Durban said no decision has been made, and Dell officials have declined to comment on the rumors.

However, the board member said Dell was taking a look at EMC and its federation business model. Under that model, developed by CEO Joe Tucci, EMC's businesses—VMware (virtualization), RSA (security), EMC II (storage), VCE (converged infrastructure) and Pivotal (big data and platform-as-a-service, or PaaS)—run as independent-minded entities that leverage their capabilities to offer end users stacks of services and solutions, all of which is managed by EMC.

Tucci has praised the business model, but it has been criticized by activist investor Elliott Management, whose officials have said the model has become unworkable and should go away when Tucci retires. Elliott also has urged EMC to shed VMware, claiming the business has become a drag on EMC's financial numbers.