EMC, the world’s largest independent storage firm, paid a 45% premium for RSA Security, a firm with stagnant sales. Its stock promptly tanked, dropping 4%.
Expect more tanking
RSA products are primarily authentication (you are who you say you are) and access management (the authentic you is allowed to see this data). What does this have to do with data storage? Not much. Certainly EMC could have OEM’d security products for a lot less than $2.1 billion. From a financial perspective, EMC just paid $2.1 billion for $42 million in RSA earnings: a 2% return.
Hope Is Not A Plan
EMC is hoping that their strong grip on CIO wallets will enable them to dramatically increase RSA sales. To do so EMC’s crack commission sales force will have to step out of the corporate data centers they know so well into the business units they don’t. I can’t think of one IT firm that has done that successfully, but hey, maybe EMC will be the one to break the code.
Consumers Are The Big Win In Security
As with most markets in America and IT, consumers drive volume. I’ve used hardware security authenticators and know that consumers won’t use them. IT can mandate them for corporate use, but only with business unit buy-in. The jury is still out on which consumer security solution will win, but IMHO it isn’t going to be a set of solutions that have been around in various forms for 10 years.
EMC’s Strategy Is Broken
If ever a company cried out for inspired re-invention, it is EMC. They have tremendous resources, a strong brand, and the ear of every F5000 CIO. The signs of a hard landing in enterprise data storage are growing every day, just as in the mainframe and minicomputer markets of the late ’80s. EMC could re-invent data storage using modern design paradigms. Instead they appear intent on following their Rt. 128 minicomputer brethern into oblivion.