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Dell (DELL) Likely to Purchase Remaining Stake in Secureworks

Zacks Equity Research

Dell Technologies DELL is considering buying the remaining outstanding shares of Secureworks SCWX, according to a Bloomberg report.

Secureworks is engaged in managing and outsourcing cybersecurity services for corporate clients. The company also develops software to detect and respond to cybersecurity threats.

Dell owns 86.2% of Secureworks through ownership of the entirety of the company’s Class B shares as of Nov 1, 2019. By acquiring the remaining 13.8% shares, Dell will be able to fully consolidate Secureworks with its business.

However, official representatives from Dell and Secureworks have declined to comment on this matter.

Nevertheless, investors have reacted positively to the rumored takeover of the remaining shares of Secureworks. Shares of Dell improved 1.7% in yesterday’s trading session.

Secureworks Takeover: A Prudent Move

Dell had initially acquired majority shares of Secureworks in 2011. Later in 2016, Secureworks business was made public through an initial public offering.

Intentions to acquire the remaining stake in Secureworks mark a departure from Dell’s previous plans to sell its stake in the company. According to a Reuters report, Dell was contemplating to sell its stake in Secureworks in February 2019.

Improving trends in the cybersecurity market are likely to have persuaded Dell to contemplate buying the remaining stake in Secureworks, instead of opting for a divestiture.

In fact, according to an insight from TechCrunch, cybersecurity-related spending has been rising steadily and is on track to surpass $133 billion in 2022.

Moreover, demand for security solutions in cloud computing platforms has been increasing as a single breach may lead to loss of vital information and hamper a company’s reputation. Furthermore, the propagation of IoT devices has made cloud security crucial.

Against such a backdrop, Dell’s efforts to ramp up security services offerings bode well. CyberArk Software CYBR and Cisco CSCO are other companies known for their security products and services.

Dell Technologies Inc. Price and Consensus

 

Dell Technologies Inc. Price and Consensus

Dell Technologies Inc. price-consensus-chart | Dell Technologies Inc. Quote

Wrapping Up

We note that Dell has been striving to reorganize portfolio. 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 Dell EMC Ready Solutions for AI portfolio with a new design for the Domino Data Science Platform.

Additionally, Dell has introduced 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.

Moreover, the company is anticipated to benefit from its dominant position in the enterprise IT solutions market. Strong spending by customers on infrastructure also remains a tailwind.

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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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
SecureWorks Corp. (SCWX) : Free Stock Analysis Report
 
CyberArk Software Ltd. (CYBR) : Free Stock Analysis Report
 
Dell Technologies Inc. (DELL) : Free Stock Analysis Report
 
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