EMC to buy RSA for $2.1 billion

The data storage specialist picks up RSA Security, a maker of identity management and encryption products.

Data storage specialist EMC has agreed to acquire digital security company RSA Security for slightly less than $2.1 billion.

EMC will pay $28 in cash for each share of RSA and the assumption of outstanding options, the Hopkinton, Mass., company said Thursday in a statement. That brings the aggregate purchase price to just under $2.1 billion, net of RSA's existing cash balance, it said.

With the takeover, EMC said, it will create a company that can help organizations securely manage their information. EMC is a large provider of data storage products, while RSA sells identity and access management technologies, such as its SecurID tokens, as well as encryption and key management software.

"EMC is where information lives and tomorrow EMC will be the company where information lives securely," Joe Tucci, chief executive of the data storage maker, said on a conference call.

During the conference call, Tucci faced heat from financial analysts who questioned the relatively high price paid for RSA and the reasons for acquiring the company.

"This company and this space are incredibly hot," Tucci said in response to the critique. "This was critical technology. I am telling you this was very competitive. Not having it would have put us at a severe disadvantage, and others that might have bought it would not have wanted to share it with us."

To grow its business, EMC needs to integrate data storage and security, Tucci said. "That is mandatory and if you don't do it right, you fall off. The whole name of the game here is how you build continued value for the long shot."

The announcement of the deal came after RSA Security earlier on Thursday issued a statement saying that it was in negotiations with unnamed parties on a potential strategic deal. That statement followed a New York Times report that said EMC was close to buying the digital security company. RSA put itself up for auction several months ago, the newspaper said.

The acquisition is expected to be completed late in the third quarter or early in the fourth quarter of 2006, subject to customary closing conditions and regulatory approvals, EMC said. Upon completion of the deal, RSA will operate as EMC's Information Security Division, headquartered in Bedford, Mass.

Art Coviello, RSA's current president and CEO, will become an executive vice president of EMC and president of the division.

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