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Partners Hail Dell SecureWorks IPO, Decry Possible Spinoff Of SonicWall

Solution providers say the cybersecurity services business would have more credibility as an independent business.

Dell partners are hailing a planned initial public offering of common stock for the Dell SecureWorks cybersecurity services business.

In fact, some Dell partners say they would like to see managed security services business on its own rather than a potential spinoff of the Dell SonicWall security division.

"I like the idea of the SecureWorks IPO and even a spinoff of that business," said Rory Sanchez, CEO of SL Powers, a top Dell security partner based in West Palm Beach, Fla. "Customers and partners would feel more comfortable with SecureWorks as a third-party company -- an arm's length away from Dell. It makes SecureWorks a more independent company."

[Related: Dell Said To Be Talking To Buyout Firms, Citigroup About Sale Of SonicWall, Quest, Perot]

With SecureWorks on its own, Sanchez said, customers would feel more confident with regard to the security services provided by the business. "A lot of clients want an outside vendor monitoring security," he said.

Dell said Wednesday that a SecureWorks offering will commence after a formal review of the IPO stock registration by the Securities and Exchange Commission. Dell said the number of shares and price range for the common stock have not been determined.

The IPO filing comes about four years after Dell acquired Atlanta-based SecureWorks for about $612 million.

The IPO and a report of a potential Dell SonicWall spinoff come in the wake of questions regarding Dell's debt load in the wake of its proposed $67 billion blockbuster acquisition of storage market leader EMC.

Reuters reported this week that Dell is talking to three equity buyout firms -- KKR & Co. LP, Thoma Bravo LLC and Vista Equity Partners Management LLC -- about the possibility of purchasing the SonicWall security division and the Dell Quest Software business for about $2 billion each.

At the same time, Bloomberg has reported, the EMC acquisition will add almost $50 billion to Dell's debt load on top of the $11 billion it is already carrying as a result of its $24.4 billion leveraged buyout in 2013.


Paul Neyman, president of Houston-based Waypoint Solutions, told CRN he is not concerned about a Dell SecureWorks IPO but would like to see SonicWall remain part of Dell. "I'm of the old school ideal that firewalls should be put in with networks," Neyman said. "So I'd rather see SonicWall stay with Dell Networking and Force10."

Other partners said they are also disappointed in a potential SonicWall spinoff. "We like SonicWall being part of the Dell portolio," said a Dell SonicWall partner who did not want to be identified. "We were just ramping up our SonicWall business. EMC is a great company with some great products, but we don't think EMC security is the way of the future."

One potential upside of a SonicWall spinoff, he said, is it would take the business out of any internal fights for R&D funding, said Waypoint Solutions' Neyman. "If they can get the right parent organization, they may be able to innovate more quickly, and respond to the market more quickly," he said.

Michael Goldstein, president and CEO of LAN Infotech, a Fort Lauderdale, Fla.-based Dell partner, said he would welcome a spinoff of both Dell SecureWorks and Dell SonicWall. "SecureWorks has an amazing team of cybersecurity specialists, but customers and partners would rather see it as an independent company," he said.

As for a SonicWall spinoff, Goldstein said, the business has never been fully integrated into Dell. "SonicWall was never fully melded into Dell -- it wouldn't surprise me to see it spun off," he said. "SonicWall has always been extremely channel-friendly. I would welcome that. It doesn't fit into the rest of the Dell software business."

Goldstein said he is confident that the Dell EMC acquisition will be boosted by the sale of certain assets. He praised Dell founder and CEO Michael Dell for pushing forward with a much stronger combined enterprise portfolio from the EMC deal. "Michael has put a lot into this," he said. "I am sure it is going to be successful. I would never bet against him."

Joseph F. Kovar contributed to this story.

PUBLISHED DEC. 3, 2015

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