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Dell Secure Works Officially Files For IPO — Welcome News For Partners

Dell followed through with plans revealed earlier this month to launch an initial public offering of its Dell Secure Works cybersecurity business, filing with the Securities and Exchange Commission on Thursday to officially take the division public.
Secure Works will be listed on the Nasdaq exchange under SCWX, though the filing did not say how much the offering was expected to raise or the expected share price. Reports said the valuation could be as much as $2 billion. The Secure Works business includes managed security services, threat intelligence and incident response.
Dell Secure Works declined to comment beyond the filing as to what the IPO might mean for partners.
Michael Gray, director of network operations at Thrive Networks, a Tewksbury, Mass.-based Dell partner, said the move appeared to be a good one for both Dell and Secure Works. He said the separation provides more validity to the Secure Works security business as vendor-agnostic and will allow it to invest further in the company, though it would still maintain a close relationship with Dell.
“It’s a vote of them taking their security practice very seriously,” Gray said, comparing the relationship to that of EMC and VMware. “Financially, it shows they think that Secure Works can grow to be a behemoth.”
The SEC Form S-1 filing revealed revenue for the unit of $262.1 million in fiscal 2015, up 27 percent year over year from $205.8 million in 2014. The company posted a net loss in both of those periods, $38.5 million in 2015 and $44.6 million in 2014.
The SEC filing also revealed the extent of the unit’s business through the channel, which it said accounted for 6 percent of its revenue in fiscal 2015. The company said its strategy is to “increase the percentage of our revenue that we derive from sales through our channel partners.”
Gray said he would be interested in working with Secure Works as a partner, but that a direct strategy makes a lot of sense for the vendor as the clients are mostly enterprises.
Although Dell acquired Secure Works in 2011 for $612 million, the division has operated as a fairly independent unit since the acquisition. Going forward, the filing said, Denali Holding, the parent company of Dell, will maintain a controlling stake but no Class A shares in the company, the filing said. The filing said Denali intends to retain ownership of at least 80 percent of the value of the stock going forward.
Secure Works has also entered into agreements with Dell to continue services from the company, including for executives and employees, and around property. It also entered into agreements with Dell around procurement of hardware, software and services from the company at a discount.
The news of the IPO comes as Round Rock, Texas-based Dell is expected to shed business units in advance of and after its anticipated merger with EMC early next year. Dell revealed its intention to buy EMC for $67 billion in October and just completed the shop-around period this week.
Gray said he expects to see more units leaving Dell as the company looks to raise capital for the deal, calling the Secure Works IPO a “little chip” at the hefty price tag the company plans to pay for EMC. Other security divisions that have rotated through rumors of a spin off or sale include SonicWall, Quest and App Assure, he said.