Since it bought RSA Security for $2.1 billion roughly a year ago, EMC (NYSE: EMC ) has been busy snapping up smaller digital security companies like Valyd Software and Network Intelligence. Its latest purchase came Monday, when EMC purchased Verid for an undisclosed amount -- a deal that should provide a nice boost for RSA.
Verid develops software for knowledge-based authentication (KBA), which helps to verify the identity of a person signing up for a given service.
The system asks a user a variety of questions: where you lived a few years ago, the make of your first car, and so on. Verid then matches the answers to a variety of databases.
"With the surge in online fraud and identify theft, KBA has certainly been a high-growth business," said Nick Selby, an analyst with the 451 Group, in a Fool interview. "It's still a small market, but that won't be the case for long. And Verid has a strong KBA offering."
For a small company, Verid has enjoyed considerable success. It boasts more than 130 customers, in industries including financial institutions, telecom operators, and retailers.
As part of EMC, it's a good bet that Verid will gain lots of cross-sale opportunities with customers such as Bank of America (NYSE: BAC ) . Keep in mind that EMC has a potential reach of 100 million online financial-service user accounts.
Verid's system might also find a new market in internal corporate authentication. It could help to block employees from sensitive areas, potentially reducing theft, regulatory breaches, and fraud.
EMC faced abundant criticism when it bought RSA, and it's still unclear whether the deal was a smart move. Security is a tough market, with fierce competitors such as Symantec (Nasdaq: SYMC ) , Check Point Software Technologies (Nasdaq: CHKP ) , and IBM (NYSE: IBM ) .
But the Verid transaction looks spot-on, and it's a strong fit with RSA's assets. That's probably not enough to calm EMC's naysayers, but it's encouraging nonetheless.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,161 out of 29,574 in CAPS. The Fool has a disclosure policy.
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