Intel announces intent to acquire McAfee
Thursday, 19 August 2010 17:44


Some deals just don’t make sense.  Some have underlying motivations that are not immediately apparent.  Intel’s announced intention to acquire McAfee for $7.68 billion is a deal that does not make sense no matter what perspective you take.


Technology acquisition.   One argument put forth by analysts so far is that by acquiring a market leading anti-virus software company Intel will be able to add security features to their core business, chips.  $7 billion dollars is a lot to pay for technology when there are 27 such technology companies, that would cost less to acquire ( Symantec, of course being more expensive).  Intel could acquire one of many anti-malware companies that have arguably better technology, better research, and much less baggage.


Brand enhancement. While there is a good argument to be made for technology vendors to acquire security companies to enhance their brands (EMC + RSA a notable example) Intel is not going to accomplish that by acquiring McAfee.  Intel already has one of the most recognized brands in all of technology and they have no negative perceptions because of a lack of security association.  Intel is highly respected across the board and is rarely faulted for lack of security.  This acquisition does not bolster their brand at all. If anything it dilutes Intel’s brand.


Government play.
With a tremendous increase in government spending on cyber security projected one could argue that acquiring McAfee gives Intel a piece of the action. McAfee’s EPO desktop security suite is already short listed within most of the US Defense Department and the firewall business McAfee acquired with their Secure Computing acquisition has a large federal component.   But Intel is already entrenched in all aspects of state, local and federal government in almost every country in the world with their ubiquitous CPUs.   Intel needs no help getting government business.

Network play. McAfee has invested considerable time and effort in revamping the Secure Computing line into a credible network security play.  They also have one of the largest install bases of Intrusion Prevention  (IPS) solutions.  Will Intel work to enhance those network security products by supporting multi-core architectures in them?  What does that mean to every other networking company that could have been big consumers of Intel CPUs?  How will they feel about using chips from a direct competitor?  And if the acquisition is a networking play why would Intel put McAfee in their Software and Services division?


Investment. In the tradition of conglomerates and holding companies this acquisition could be viewed as an investment in the relatively stable security industry.  The plan would be to streamline operations and increase profitability.  Is Intel really trying to become the next GE or ITT?  Is that its core strength? Did it look at other investment opportunities?  I understand beach front property on the Gulf coast is looking pretty good right now.

At $7.68 billion this is the biggest acquisition of a pure play security company ever. It is also the worst. There is no synergy, no channel benefits, marginal revenue enhancement (considering the price),  no new markets, and no meaningful strategy.

 

 

Comments
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Albatross   |192.149.74.xxx |2010-08-19 13:59:02
"Is a deal that does make sense" ??
Debbie Mahler  - Valid Points but.....   |98.227.151.xxx |2010-08-19 13:59:11
Hi Richard! You raise some extremely valid points from the industry/business
side of things but! What has me stumped is why McAfee? In the past month alone,
I've had students report to me that their McAfee software has let in
"KNOWN" Trojans! Just two weeks ago, I was called to a client office to
repair the damage to their network when McAfee let in a known "drive-by"
Trojan. This would make more sense if the software was worth anything - but it's
not! Very odd indeed.

Debbie
The invisible Man  - Its my understanding   |94.173.2.xxx |2010-08-19 14:43:21
Is it a possibility that Intel seek to create greater security farther up the
layers, similar in sense to the TXT extensions and providing this to consumers.
From a longer term perspective, this is a confidence play for the whole
industry.
Js Op de Beeck   |109.130.80.xxx |2010-08-19 19:13:18
Don't forget the 'Cloud' ...

Mc Afee provides security solution for VMWARE-Safe
and has strong capacity to progress into the cloud.

Cloud is bloat of CPU,
Storage, Network and Memory ... but security MUST be part of it too.


Js
Mandeep Khera  - CMO   |98.207.111.xxx |2010-08-22 15:42:33
Richard

Couldn't agree with you more. This came out of the left field. The only
logical explanation is the technology integration that they have been working
on. But, they could have accomplished this without an acquisition. Another point
you could make is that Intel needed to diversify into software and services as
all hardware vendors are trying to do. And, security software certainly offers
better margins in the long run.

It'll be interesting to see how Intel
integrates such a large acquisition into its portfolio - both technologically
and culturally

Mandeep Khera
Beeck  - my understanding   |195.60.175.xxx |2010-10-27 17:27:10
I was called to a client office to
repair the damage to their network when
McAfee let in a known "drive-by"
Trojan
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