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Secureworks: MSSP, Cybersecurity Business Challenges Continue

SecureWorks CEO Michael Cote

Secureworks, a Top 100 MSSP, continues to hit some business turbulence as the cybersecurity company strives to evolve toward software-driven managed security services. The latest challenge involves a shrinking average deal size, the company disclosed today.

Although Secureworks is making some progress on multiple fronts, the business challenges show just how difficult it is to compete in today’s fast-changing MSSP market, and also highlight the challenges parent Dell Technologies may face as it potentially seeks to sell Secureworks.

For the Secureworks fiscal first quarter of 2020:

  • Revenue was $132.8 million, increased 5.3 percent from the first quarter of fiscal 2019;
  • GAAP net loss was $8.3 million, compared with $13.8 million in the first quarter of fiscal 2019.

Secureworks: Good News, Bad News

The Secureworks figures generally beat Wall Street’s expectations, but the company revealed the deal-size financial hurdles as well. In a prepared statement, CEO Michael Cote said:

“Our first quarter financial results were positive. However, the value of new business in the quarter fell below our expectations. In the near-term, we are focused on business execution as we continue to transition our product portfolio and business model to software-driven solutions. I am confident that we have the right strategy and have identified the right actions to drive growth and long-term value,.

The result: SecureWorks expects fiscal 2020 revenue of $535 million to $545 million, down from an earlier forecast of $565 million to $575 million.

The shrinking size of some customer contracts arrive after Secureworks revealed customer churn issues last quarter.

Secureworks: MSSP Business Evolution

Still, there are opportunities ahead. The overall MSSP market will grow about 14.5 percent annually through 2024, according to Market Research Engine.

In a prepared statement, Cote reinforced some familiar themes from Secureworks, stating that the company’s transition toward software-driven security services is showing progress — including the launch of Red Cloak Threat Detection and Response (TDR), a security analytics application.

The company’s Red Cloak Partner Program has also built relationships with Carbon Black, CrowdStrike — essentially marrying Secureworks’ managed security services with third-party endpoint protection services.

We’ll update this coverage once we gather more information from Secureworks’ earnings call.

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