Dell Technologies Mulls Over RSA Cybersecurity Unit Sale

Dell Technologies (NYSE:DELL) is contemplating the divestiture of its RSA Security business, per Bloomberg. The company hopes the deal will fetch at least $1 billion, including debt, according to people familiar with the matter.

RSA is best known for its software tokens, which generate random codes that grant access to corporate networks. The company’s solutions also help enterprises detect and respond to cybersecurity threats as well as reduce fraud, IP theft and cybercrime.

Dell gained ownership of the RSA business via its acquisition of EMC (NYSE:EMC) in 2016.

The RSA divestiture would help Dell focus on its core business, including the server market, where it has been facing stiff competition from Hewlett Packard Enterprises (NYSE:HPE) . Per IDC data, the company’s market share contracted 30 basis points (bps) on a year-over-year basis to 19% in second-quarter 2019, while HPE’s share expanded 150 bps to 18%.

Moreover, Dell incurred a significant amount of debt ($49 billion) during its acquisition of EMC. The purchase consideration received from the deal could help pay off a portion of this debt.

RSA has also been dealing with stiff competition in the security space from the likes of Okta (NASDAQ:OKTA) and Ping Identity Holding (NASDAQ:PING) , which has eaten into profits. The RSA divestiture should help Dell minimize losses in the near term.

HPC & AI Portfolio in Focus

If the deal materializes, it will release resources that Dell is expected to invest in strengthening its portfolio offerings for data centers. This in turn will aid revenues over the long haul.

The company is expanding Dell EMC’s portfolio of Ready Solutions for HPC storage with new turnkey solutions for ThinkParQ’s BeeGFS and ArcaStream’s PixStor file systems. It is also expanding its Dell EMC Ready Solutions for AI portfolio with a new design for the Domino Data Science Platform.

Moreover, Dell is introducing five reference architectures to simplify AI deployment in collaboration with leading partners like DataRobot, Grid Dynamics, H20.ai, Iguazio and Kubeflow on Red Hat OpenShift.

Furthermore, the company is adding Dell EMC PowerSwitch Z9332F-ON to the PowerSwitch Z Series Portfolio.

Additionally, Dell is expected to benefit from its dominant position in the enterprise IT solutions market. Strong spending by customers on infrastructure is an upside.

Currently, Dell carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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