Intel-McAfee Deal Is A Head Scratcher

Chipmaking giant Intel is going to acquire security software vendor McAfee for $7.68 billion, in an effort to closely align processing power and security in the next generation of Internet-connected devices. But one security software analyst doesn't see the synergy or the value of the deal to McAfee. The proposed acquisition, announced Thursday, is intended to help Intel, whose processors are largely used just in PCs and servers, power Web-connected technology in ATMs, automobiles, medical equipment, televisions and the growing number of mobile phones and other portable devices. And with McAfee "inside," those devices will be more secure.

"With the rapid expansion of growth across a vast array of Internet-connected devices, more and more of the elements of our lives have moved online," said Paul Otellini, Intel president and CEO, in a prepared statement. "In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences." McAfee will operate as a wholly-owned subsidiary of Intel and operate within Intel's Software and Services Group, Intel said.

Like other industry analysts, Peter Firstbrook was surprised at the news, but not in a good way. "I'm struggling to find the value of owning McAfee for Intel," said Firstbrook, research director at Gartner.

McAfee's primary business is anti-virus software, although it has made recent acquisitions of smaller companies in the mobile space, Firstbrook noted. In May, it acquired Trust Digital, a provider of enterprise mobility management and security software. In June it acquired Solidcore Systems, a company focused on protecting critical IT infrastructure from devices to the data center, and in July, it announced plans to acquire TenCube, a provider of a mobile security service that can locate, lock, back-up and wipe data from lost or stolen mobile devices.

"I don't know why [Intel] needs to own [McAfee]," Firstbrook said, adding that if those acquisitions had so much value to Intel's next-generation device strategy, Intel could have acquired them instead of acquiring McAfee. "They're just little start-ups and Intel could have acquired them for less than it's paying for McAfee," he said.Firstbrook also questions the synergy between Intel and McAfee from McAfee's point of view. It could be that Intel could leverage some intellectual property from McAfee to make their chips more secure, compared to those of ARM, AMD and other makers of chips running in various mobile and next-generation devices. McAfee could work slightly better with Intel chips than other security software and leverage some kind of firmware security capability, but Firstbrook said he doubts Intel could give that security advantage just to McAfee.

"It would be unlikely for antitrust [laws} to allow that. So for Symantec or [other security software vendors] if there is some technology that would be really useful to all security vendors, Intel would probably have to allow everybody to use it," he said.

Firstbrook says one possible victor in this acquisition is Symantec, the number one security software vendor. With McAfee tied up in developing security software with Intel that may pay off for Intel-McAfee in the long term, it could be "a huge distraction" for McAfee in competition with Symantec. Gartner research released in April showed Symantec with 20.1 percent of the global security software market in 2009 , followed by McAfee's 11.6 percent. Other security software vendors, including Trend Micro, IBM, Cisco, Kaspersky and others, each had shares in the single digits.