EMC Corporation (EMC) announced that it has acquired NetWitness Corporation, a privately-held network security analysis solutions provider, for an undisclosed amount. The deal was completed on April 1, 2011.

NetWitness will be incorporated into RSA, which EMC acquired in September 2006, in order to enhance its information and security management segment.

NetWitness, which specializes in network security analysis and visualization software, has recently upgraded itself to provide malware analysis for its corporate clients. The company also offers a wide range of information security solutions pertaining to insider threats, frauds, espionage, data mismanagement and leakage, and uninterrupted supervision of vital security controls.

NetWitness has a global presence and its clients include private companies as well as several government organizations.

The acquisition is expected to boost EMC’s product portfolio and add to its customer base. Cross-selling into the customer base would also enable EMC to generate additional revenue in the long run.

Recently, EMC was in the news, as it reported a compromise in its security division of RSA. Although the security breach had put EMC in an embarrassing situation, we believe the company has stepped up its efforts to strengthen its security portfolio through strategic acquisitions.

EMC has recently signed an agreement with the leading global information management solutions provider, SDL. The partnership is expected to complement EMC’s existing relationships in Web Content Management (WCM) and Web Engagement Management (WEM) markets.

We believe the acquisition of NetWitness, agreement with SDL and other initiatives implemented by EMC will provide the edge that EMC needs to outrun its competitors such as Hewlett Packard Company (HPQ) and International Business Machines Corp (IBM).

However, we have a Neutral recommendation on EMC in the long term due to the recent security lapse that could have a negative impact on EMC’s forthcoming quarter. It could also negatively impact its client base, as companies press for more sophisticated solutions.

This would put pressure on EMC to come up with suitably innovative products. In the meantime, competition could worsen, if new entrants with innovative solutions in the security market seize the opportunity to create their own niche.

Currently we have a Zacks #2 Rank for EMC, which implies a Buy rating on a short-term basis.

 
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