5 Things To Know About Dell’s $2.08 Billion Plan To Sell RSA Security

From Dell’s security-focused M&A to changes in RSA’s valuation to STG’s cybersecurity footprint, here are five of the most important things to know about RSA moving into the hands of private equity.

A New Day For RSA Security

Dell Technologies Tuesday announced long-anticipated plans to sell its RSA Security business, ultimately tapping private equity firm Symphony Technology Group (STG) to take over the Bedford, Mass.-based business in exchange for $2.08 billion. Spinning RSA out will allow Dell to simplify its security strategy and focus on securing and protecting data at the edge, in the core, and in cloud environments.

“The strategies of RSA and Dell Technologies have evolved to address different business needs with different go-to-market models,” Dell Technologies COO Jeff Clarke wrote in a blog post. “The sale of RSA gives us greater flexibility to focus on integrated innovation across Dell Technologies, while allowing RSA to focus on its strategy of providing risk, security and fraud teams with the ability to holistically manage digital risk.”

RSA, meanwhile, was most interested in a suitor that was enthusiastic about its mission, committed to its customer and partner base, and interested in maximizing the company’s talent, experience, and growth potential, President Rohit Ghai wrote in a blog post. The transaction is expected to close in the next six to nine months.

“With a more independent configuration, we expect to be in an even better position to accelerate innovation, ensure customer success with our portfolio of on-prem and cloud solutions, and expand opportunities for our partner ecosystem,” Ghai said.

From Dell’s disposal of several cybersecurity assets to RSA’s flat valuation to STG’s recent entrance into the cybersecurity arena, here are five of the most important things to know about RSA moving into the hands of private equity.

5. RSA Has Been Up For Grabs Since At Least November

Dell began conducting early-stage conversations in November about selling RSA, and was hoping to fetch at least $1 billion from the sale, including debt, according to a Bloomberg report at the time.

Things went silent again until late Monday evening, when The Wall Street Journal reported that Dell was close to completing the deal to sell RSA to STG Partners, and that an announcement could come as soon as Tuesday. Dell’s stock fell $0.31 (0.59 percent) to $52.56 per share in trading Tuesday.

RSA in February 2018 renamed the three tiers of its partner program from strategic, elite and focus (with strategic being the highest) to titanium, platinum and gold (with titanium being the highest) to more tightly align with Dell EMC. But beyond that, integration with the rest of the Dell Technologies portfolio was limited.

4. The Deal Includes Both RSA’s Product And Event Assets

The deal not only gives STG ownership of RSA’s four distinct product lines, but also control over the RSA Conference, which is the world’s largest cybersecurity event. The conference drew more than 42,500 people and 700 vendors to San Francisco’s Moscone Center in March 2019, and the 2020 edition of the show is slated for next week.

The RSA Conference began in 1991 as a small cryptography conference and has grown over the decades to cover all things security, featuring keynotes along the way from people like former Microsoft CEO Bill Gates. The conference has also added a smaller annual multi-day conference in the Asia-Pacific region, as well as one-day events in a handful of locations globally.

From a product standpoint, RSA’s offerings span the gamut and include: RSA Archer for governance, risk and compliance; RSA NetWitness for security incident event management and threat detection and response; RSA SecurID for identity and access management; and RSA Fraud & Risk Intelligence.

3. RSA’s Valuation Is Stagnant From 13.5 Years Ago

Cybersecurity has been one of the most explosive segments in all of technology, with Okta, CrowdStrike and Zscaler achieving market caps of $16.6 billion, $14 billion and $8.2 billion, respectively, less than a dozen years after they were founded.

But valuation growth has been much more fleeting for RSA, which was sold in September 2006 to Hopkinton, Mass.-based storage giant EMC for $2.1 billion. Thirteen-and-a-half years later, RSA is being spun out from Dell Technologies for $250 million less than EMC initially paid to purchase the company.

RSA is probably best known for its SecurID authentication tokens, but that space has become highly commoditized in recent years. Dell Technologies assumed control over RSA as part of its $60 billion purchase of EMC in September 2016.

2. STG Partners Is A Newcomer To Cybersecurity

STG has been around since 2002 investing in software, data and analytics leaders in the midmarket. But the Palo Alto, Calif.-based private equity firm shied away from cybersecurity until April 2019, when it took a majority stake in network modeling and risk scoring platform RedSeal for a reported $100 million, according to Momentum Cyber.

RedSeal today employs 180 people and had raised just over $90 million prior to its acquisition by STG, according to LinkedIn and Crunchbase. In addition to commanding a valuation 21-times higher than RedSeal, RSA employs nearly 3,100 people around the world, according to LinkedIn.

Outside of cybersecurity, STG participated in a $20 million Series C funding round for San Francisco-based business intelligence provider Govini in May 2015.

1. The Deal Continues Dell Trend Of Selling Off Security Assets

Dell moved aggressively into the cybersecurity space in the early 2010s, taking a majority stake in cybersecurity services firm Secureworks in 2011 and purchasing database management provider Quest Software and SMB-friendly network security company SonicWall for $2.36 billion and $1.2 billion, respectively, in 2012.

Dell then inherited RSA as part of its $60 billion buy of EMC in September 2016. But Dell changed course of two of its earlier security acquisitions, selling both Quest and SonicWall to private equity firm Francisco Partners in November 2016 for an undisclosed amount.

After the RSA sale closes, Dell’s security portfolio will be limited to Secureworks, with Bloomberg reporting in December that Dell was looking to buy out the company’s minority stakeholders that hold a combined 13.6 percent interest. Dell Technologies is also the majority stakeholder in VMware, which in October 2019 bought endpoint detection and response (EDR) firm Carbon Black for $2.1 billion.