RSA's Coviello making good on billion-dollar promise

Former RSA CEO says the honeymoon's still on at EMC

By Paul F. Roberts
December 01, 2006

It's been more than two months since EMC officially exchanged rings in the $2.1 billion courtship of RSA Security, but former RSA chief Art Coviello says the honeymoon's still going on, and that he's happy to take a step down from the CEO's post …for now.

In a wide-ranging discussion with reporters over dinner in Boston on Wednesday, Coviello, the charismatic chief of RSA for more than a decade, said that he expects to stay on at EMC for at least the next few years, as he makes good on a promise to EMC CEO Joe Tucci to grow RSA into a $1 billion a year company by 2009.

Tight integration with EMC's product line is a key element of that plan, such as embedding RSA's access management technology into EMC's Documentum content management system.

"Customers are craving integrated solutions" he said.

EMC pushed RSA along towards meeting that goal by acquiring security event management vendor Network Intelligence on the same day that it closed its acquisition of RSA. Together with RSA's traditional strength in data encryption, the Network Intelligence software will be a key element of the EMC Common Security Platform, which will integrate core services authentication, auditing and authorization across EMC's product line.

That $175 million buy would have been beyond the means of RSA, which reported total revenue of $181 million through the first half of 2006, especially after the Cyota and PassMark acquisitions. Network Intelligence will add around $20 million in revenue to the RSA division's bottom line this year, and double that next year, Coviello said.

Coviello is also banking on strong growth in demand for consumer facing "adaptive authentication" technology that RSA acquired from Cyota in December, 2005, and PassMark Security in April.

That business has been growing at about 100 percent annually, from $11 million last year to around $30 million this year, and Coviello expects that growth trend to continue for a least a couple more years, as banks and other financial institutions get in line with guidance from the Federal Financial Institutions Examination Council (FFIEC) to beef up user protections in online banking portals.

Coviello is also looking to expand the value of those acquisitions with
offerings like a risk assessment service that could be sold to banks and
financial services companies and that leverages the phishing and online crime
intelligence collected by RSA's Cyota team in Israel. RSA researchers are also
working on applying fraud intelligence, like that used by Cyota, to data flows
within an organization in an effort to spot anomalies that may reveal insider
threats, Coviello said.

But the former CEO said he's seeing opportunity everywhere these days, as the EMC name opens doors that were previously shut to accounts across verticals, but especially in banking and financial services. Executives who saw RSA as a secure token vendor a year ago now see the company's technology as a strategic investment, when coupled with EMC, he said.

Those accounts were hard to win before EMC entered the picture, and Coviello admitted that RSA's PassMark acquisition was more about getting a foot in at major financial institutions like Bank of America than about the PassMark technology.

Reflecting on the first quarter since 1992 that he hasn't had to face Wall St. analysts for an earnings call, Coviello said that he felt as if he had "traded nine board members for one (Tucci)." "In some ways, I'm more independent than when I was CEO and had a board of directors, where there's a lot more scrutiny of operating costs and profitability," he said.

Coviello claims that he's been given free reign to use the RSA division to develop security solutions independent of EMC's product lines, even while it leverages EMC's infrastructure, customer support and professional services groups -- not to mention the company's $6 billion war chest for future acquisitions.

And with that kind of bankroll, future acquisitions are definite possibility. Coviello estimated he spent around 30 percent of his time vetting possible purchases, and that another mega-purchase along the lines of RSA weren't out of the question, though they'd have to be "compelling."

But, once a CEO always a CEO. Asked whether he could be happy staying on as an Executive Vice President at EMC, Coviello said he "didn't know about that," but waxed philosophical.

"When I was 30, my goal was to be a CEO by the time I was 40. I don't think like that now. I know what I'm going to be doing for the next couple years."