Since 2003, EMC’s abrasive CEO, Joe Tucci, has overseen 17 acquisitions – a collection he calls his “string of pearls”. But with his latest deal to buy RSA Security, an early pioneer of access management and encryption software, for $2.1 billion, many observers are wondering if Tucci has lost his golden touch.
Certainly, those on the Wall Street analyst conference call immediately following the announcement were of one mind: the deal is a mistake. Objections include the premium paid: RSA’s revenues climbed by just 9% in the years 2001 to 2005, and even if revenues rise in line with RSA’s predictions this year to $375 million, EMC is still paying more than 5.5 times revenues for the company.
But Tucci is adamant the deal is also good for EMC, castigating the sceptics who suggested EMC could have simply signed a reseller partnership with RSA. He argues RSA was hot property that “wasn’t going to be around [for long]. “Do you think we were the only ones that saw that? The others that might have bought [RSA] wouldn’t have wanted to share [its technology],” he says.
The competition for RSA is thought to have included several other storage and security vendors, including Symantec, best known for its antivirus software. It sent shockwaves through the storage industry last year when it acquired enterprise back-up software maker Veritas. Since then, mid-range storage systems vendor Network Appliance has also bet on integrating storage and security, with its acquisition of encryption company Decru. Had RSA fallen into rival hands, EMC risked being left of the sidelines of that convergence, Tucci maintains.
But while the wisdom of the Symantec-Veritas tie-up is still questioned by the financial community, that is because of the difficulties in merging these two large companies, rather than a dismissal of a storage-security integration philosophy, says Jon Oltsik, an analyst with IT sector adviser, the Enterprise Strategy Group.
Many of the larger storage vendors are throwing their weight behind the concept of information lifecycle management as a more efficient – and cost-effective – method of handling the storage of enterprise data. However, it has been pioneered “without any real consideration for security,” says Oltsik. “Market realities interfered with this vision: You can’t touch data unless you can guarantee confidentiality, integrity and availability.”
The RSA acquisition will give EMC the ability to encrypt and protect data while its at rest, and also provide identity management to control access to information, says EMC’s Tucci. That will help the company make the transition to an “information management” vendor.
The RSA deal is unlikely to be the final enabler of that transition. And over the next year there will be a great deal of focus on how well Tucci’s latest – and largest – acquisition sits alongside his other pearls.