EMC seeks “Vision Thing” with RSA Buy

Wall Street revolts, but Tucci defends Identity, Data Strategy

EMC CEO Joe Tucci likes to describe his company’s acquisition strategy as a “string of pearls” approach, focusing on small buys of top-notch technology: Documentum, VMware, Captiva. All together, those pearls add up to something that’s really valuable.

It’s a quaint image, evoking gifts handed from doting moms and dads to their daughters. So you can imagine the outrage felt by all those moms and dads at the big Wall Street firms when Tucci bling-ed up his tasteful little necklace with a walnut sized pearl in the form of RSA Security, maker of encryption and authentication technology, at a cost of more than $2 billion.

The Street hasn’t quite forgiven Tucci. In the days that followed the June 29 announcement, traders drove EMC’s share down almost 3 percent while analysts from Bank of America, A.G. Edwards, and other firms beat up on execs from EMC, accusing the company of drifting from its core business and paying too much for RSA, to boot.

That line of criticism recalls Woody Allen’s famous joke about the food they served at the Catskills resorts (“It tastes terrible … And such small portions!”). True, $2 billion is a lot for a company that earned just over $5 million on $87 million in revenue last quarter. EMC had to beat out at least one other company to win RSA, though. (Symantec was rumored to be a suitor, as was HP.)

Off Wall Street, the executives and industry experts say that EMC may be on to something with this buy.

First of all, Wall Street guys are too focused on numbers, and might not appreciate how far the storage business has shifted toward holistic “information management,” Rob Sadowski, EMC’s senior marketing manager for infosec told InfoWorld.

But there is more here than just data encryption and password management. The bigger picture on EMC-RSA includes nascent architectures for linking security services offered by both companies. EMC and RSA have been building their own version of such an architecture: EMC calls its the “common security platform” or CSP. RSA calls its version the “identity management system” or IMS.

In the combined company, those efforts can be merged. Rolling IMS into CSP will save EMC engineers the trouble of building an identity management architecture of their own. That, in turn, will give EMC a head start on creating a common set of security services across their products, Sadowski said.

CSP could turn into a framework that other vendors must write to, and extend the company’s reach into the enterprise, said Jon Oltsik at Enterprise Strategy Group.

Oltsik admits that buying RSA may have more “strategic” than tactical value for EMC. (Translation: don’t expect them to cash in anytime soon.) But that doesn’t mean it was a bad move. Besides, EMC has a way of whipping laggard acquisitions into shape.

Copyright © 2006 IDG Communications, Inc.

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