Intel to Buy McAfee for $7.68B to Secure Its Growth in the Cloud

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Intel agreed to buy security-software maker McAfee Corp. for $7.68 billion, in what looks like a major bet on the need for enhanced security at the hardware layer, as corporate computing becomes increasingly mobile and continues to move into the cloud. The giant chip maker may have lost a lot of momentum in mobile when it sold its ARM-based X-scale division in 2006, but the McAfee deal shows that it hasn’t given up hope of playing a major role in mobile and cloud computing. The acquisition will give the company a suite of products from software to services that it can tie to its hardware in order to appeal to corporate customers.

Intel CEO Paul Otellini said in a 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.” The price Intel agreed to pay for McAfee — which had revenue of $2 billion in 2009 and has gross profit margins in the 80-percent range — is a 60-percent premium to its trading price prior to the announcement. This isn’t the chipmaker’s first big bet on software by a long shot. Last year, Intel bought Wind River, a software company focused on the mobile and embedded market.

The ability to offer integrated security in its chips and other products in a variety of forms could give Intel an advantage over competitor AMD in the server market, and could give it some competitive heft against ARM in the mobile space, as corporate users become more concerned about security in the cloud. The McAfee acquisition could allow Intel to offer a way to securely tunnel between client devices and servers in the cloud, with security on a mobile chip as well as on the server side. There’s also McAfee’s software and services business to tap into.

With the number of IP-enabled devices of all kinds expected to balloon to 50 billion or more in the next decade, having a multi-platform security offering will become even more important. As enterprises and consumers move their processing and software onto mobile devices and into “the cloud,” it creates a much longer security perimeter for enterprise IT departments to worry about, and one that’s always shifting as the employee moves from device to device. Intel clearly has its eye on that ball as it tries to maintain its IT empire.

Related GigaOM Pro Research (sub req’d): Rogue Devices: The Consumer Influence on Enterprise Mobility

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