Secureworks Transformation From MSSP to Cloud XDR Security Software Provider: Reality Check

Credit: Secureworks

red Secureworks continues to transform from an MSSP service provider into a cloud-based XDR cybersecurity software provider. That business transformation is showing signs of progress, but there’s more work to be done.

The latest progress report surfaced in Secureworks’ Q3 2023 earnings, which arrived on December 1, 2022. Details include:

  • Secureworks Taegis — an XDR platform — grew annual recurring revenue (ARR) to $222 million, up 80% from the corresponding quarter last year.
  • Roughly 1,600 customers now leverage Taegis, with 800 new customers tapping into the XDR system in the latest quarter.
  • Overall Taegis revenue was $47.9 million in the quarter, up 100% from the corresponding quarter last year.

As part of the earnings announcement, Secureworks shared this slide with Wall Street analysts:

Effective today (December 1), all new Secureworks Taegis business in North America will be sold in collaboration with partners, the company announced in November 2022.

Secureworks CEO Wendy Thomas Describes Business Pivot

Wendy K. Thomas, CEO, Secureworks

Secureworks CEO Wendy Thomas described the company’s business evolution from MSSP to cloud-based security software provider during the MSSP Alert Live 2022 conference in September. The business evolution requires the discipline to discontinue legacy managed security services, while diving deeper into software development and associated automation, Thomas told attendees.

Fast forward to December 2022, and Secureworks’ overall financial results reinforce the company’s fast-changing revenue mix. For instance:

  • Overall quarterly revenue was $110.9 million — down from $133.7 million in Q3 of the previous year.
  • GAAP net loss was $28.1 million — which was larger than a net loss of $12.9 million in the corresponding quarter last year.

In a statement about the revenue shift, Secureworks said: “The revenue decrease reflects our continued focus on reducing non-strategic service offerings and prioritizing the growth of our Taegis subscription solutions.”

It sounds like Secureworks may also face some economic headwinds. The company expects revenue of $456 million to $460 million for fiscal year 2023 — which is below an analyst consensus of $461 million, SeekingAlpha noted.

Secureworks: Occasional M&A Rumors

Meanwhile, M&A rumors occasionally swirl around Secureworks — though such chatter has been quiet in recent months. Dell Technologies already owns a big piece of Secureworks, and considered buying the entire company in 2019, according to reports at the time. Fast forward to 2021, and speculation about Atos acquiring Secureworks also surfaced. But the M&A chatter didn’t result in a buyout.

Secureworks’ market capitalization is $601 million as of December 1, 2022, according to SeekingAlpha.

 

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