Surprise Intel $7.7 bln security deal is a gamble

August 19, 2010

Intel’s $7.7 billion deal to buy security firm McAfee isn’t only a surprise, it’s also a gamble. Mobile gadgets are the chip industry’s future, and Intel has fallen behind. It is betting that combining McAfee’s security software with its hardware will give it a leg up. Perhaps so. But investors who knocked down Intel’s shares are rightly skeptical the chipmaker can pull it off.

Theoretically, devices should be safer if a chip company worries about security from the start. Instead of papering over holes with software, the idea is to eliminate more of them at the source. Intel thinks McAfee’s expertise will allow this. Another potential benefit — running the software closer to the silicon, as the jargon goes — could mean it works faster and uses less power. Both are important factors for mobile devices.

Yet hardware producers and software firms are fish and fowl. Few manage to cross the divide very successfully. Microsoft’s continued flailing in consumer electronics hardware is a prime example. Integrating Intel’s engineers of intricate devices made in clean rooms with the geeks at McAfee who figure out how square-eyed keyboard junkies break software security seems intuitively problematic. Intel, though, says it has been collaborating closely with McAfee for some time and likes the results.

Whether an acquisition at a 60 percent premium to McAfee’s closing price on Wednesday is the best way to get more of them is, however, an open question. A joint venture might have captured many of the benefits with less risk. Sure, it might have been slower and more difficult to arrange. But Intel is now locked into McAfee, when some customers may prefer another company’s software.

Moreover, it is paying plenty. The median takeover premium in the technology sector over the past decade was 40 percent, according to Thomson Reuters data. Intel investors appear unconvinced, wiping almost $4 billion off the company’s market capitalization on Thursday — though a down day for stocks generally didn’t help. They may worry that a big cash pile, more than $18 billion in cash and tradable securities at the end of June, was burning a hole in Intel’s pocket. There are no such doubts for McAfee’s shareholders, though. They walk away worth almost $3 billion more than they were a day earlier.


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mcaffee has no technical expertise in security. Its products are routinely rated poorly by independent agencies

mcaffee excels in sales and marketing. it pays to get onto newly sold pc’s and the software hounds the owners until they finally buy. mcafee also uses sneaky ‘piggybakc” download deals with outfits like Adobe to get its marketing software onto older pcs and then hounds these owners

so Intel wasted 7 billion and this will add to their woes. They should have bought “Analog devices” but that price is very very very high

Posted by dallasdave | Report as abusive

[…] Robert Cyran over at Reuters Breakingviews says: “Hardware producers and software firms are fish and fowl. Few manage to cross the […]

Posted by Intel-McAfee: ‘The Semiconductor Giant Needs a New CEO’ – Deal Journal – WSJ | Report as abusive

Its a very bright move by Intel’s visionaries.

The idea of security, encryption and data flow inside the low level hardware is the future.

Today’s concept is a joke, packets of information are scanned all the time every time data is moved on the pc, its scanned by the firewall when it leaves, the provider scans data passing through its systems such as email.

The beauty of the idea is that chips and systems have a trust relationship. Meaning I trust you if you trust me so if I already scanned the encrypted data there is no need to rescan the data.

So once the packet of information leaves the chip or system it can go directly on a trusted network straight to its source not being slowed down by by hundreds of tollbooths from point a to point b.

Its much more secure with encryption on every packet due to the security builtin and the scanning that already happened.

Posted by ZimWolfe | Report as abusive