Dell to Spin Off Security Division

The IPO for SecureWorks could help Dell close a $10 billion gap in the funding of its $67 billion acquisition of EMC.
Matthew HellerDecember 21, 2015

Dell has disclosed plans for an initial public offering of its SecureWorks security division, a move that may help fund its $67 billion acquisition of EMC.

According to the Wall Street Journal, SecureWorks is one of several assets that Dell’s parent company Denali Holding is hoping to sell or take public as it looks to close the EMC deal. Dell hasn’t identified sources for about $10 billion of the deal’s funding, according to Jason Pompeii, a senior director with Fitch Ratings.

“That gap will most likely be filled by divestitures of company assets,” a source familiar with Dell’s plans told the WSJ.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Dell acquired SecureWorks in 2011 for $612 million. In July, the Atlanta Business Chronicle reported that Dell was looking to spin out the security company from its portfolio.

SecureWorks, which competes with such companies as FireEye, Palo Alto Networks, and Cisco, had filed for an IPO confidentially several months ago. The filings must be made public, however, 21 days before the company pitches itself to investors in a road show, an indication, the WSJ said, that the IPO is now moving forward.

“We believe that our singular focus on providing a comprehensive portfolio of information security solutions makes us a trusted advisor and an attractive partner for our clients,” SecureWorks said in a regulatory filing.

According to the filing, SecureWorks’ revenue for the first nine months of fiscal 2016 was $245.4 million, up 29% on the year-ago period. Net losses nearly doubled, however, to $57.5 million.

“While SecureWorks has shown both expansion in its top line, and gross margin, it also posted increasing losses,” TechCrunch noted. “Investors have shown smaller appetite for company’s going public that fail to show falling losses and increasing revenues.”

People familiar with the matter have said the business could be valued at $2 billion because of the healthy growth rate, the WSJ said.