Thursday, June 29, 2006

EMC trips

I have written in the past about EMC, viewing its acquisition spree favorably. But today's buyout of RSA Security, at a steep premium, is the first misstep for EMC. There is little room for another such bad move in the form of a large acquisition.

Despite statements to the effect that EMC customers demanded better/integrated security leading to this acquisition, the reasoning sounds as hollow as the one provided by Symantec when it bought Veritas, a debacle from which it never recovered! In fact, this is a mirror image of that acquisition - Symantec was attempting to enter into storage and now EMC is trying to get into security. Both attempts are bound to fail.

Interestingly, the reason for such a high premium paid by EMC for RSA was due to competition from another bidder - Symantec! Some companies never seem to learn. A Symantec-RSA combine makes a lot of sense, but only after Veritas is divested. Symantec having lost this one, will likely be looking at others like Entrust (ENTU), Safenet (SFNT), Aladdin (ALDN), Websense (WBSN), Blue Coat (BCSI) and Secure Computing (SCUR).

Not only is there no place for RSA in EMC's world, there is also no need to pay such a sizeable premium. A better buy for EMC would have been Opsware (OPSW) or Altiris (ATRS).

I still think EMC is a good long-term bet, but today's move has pushed a turnaround farther into the future.


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