Intel-McAfee Could Dominate Security Market

Shares of security software maker McAfee gained 57% in trading Thursday on word the company agreed to be acquired by chipmaker Intel for $7.68 billion. The shares closed at $47.01, just below Intel's offer of $48 per share. McAfee share closed at $29.93 on Wednesday.

Investors in McAfee rival Symantec also enjoyed a windfall, as its shares increased 6.20%, to $13.37, on the belief it may be the next security software vendor in line for a buyout. Intel shares, meanwhile, closed down 3.52%, to $18.90, as the company warned that the acquisition would cause a mild hit to earnings in the first year.

Analysts believe Intel will leverage its commanding presence in the PC processor market to boost McAfee's sales. One scenario could see Intel bundling McAfee security offerings with every chip it supplies to computer manufacturers.

"McAfee now sits up a level in the hardware supply chain and has the ability to embed its security software in processor components before they are used by the actual PC OEMs such as HP, Dell, Lenovo, and others," said Technology Business Research analyst Allan Krans.

Intel officials said they've come to believe that security software needs to be tightly coupled with processors for it to be truly effective against a growing range of viruses, malware, and spyware.

"Hardware-enhanced security will lead to breakthroughs in effectively countering the increasingly sophisticated threats of today and tomorrow," said Renee James, senior VP of Intel Software and Services, in a statement.

Those threats, while harmful to computer users, have helped McAfee increase its top and bottom lines in recent quarters as consumer and business spending on security software has grown in the face of mounting concerns over identity theft, piracy, and other types of cyberattacks. McAfee posted double-digit growth last year on margins of almost 80%.