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

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Intel (s intc) 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 (s mfe) 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 (s amd) in the server market, and could give it some competitive heft against ARM (s armh) 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.

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11 Responses to “Intel to Buy McAfee for $7.68B to Secure Its Growth in the Cloud”

  1. Acquisition is one way to go, but not an option for most vendors. And, “hardwiring” will lack the flexibility to react to change easily. That’s where specialized software components come in, able to adapt quickly not only to change, but to the specific requirements of each vendor’s solution and their customers’ needs.

    The McAfee acquisition really underscores the need for visibility at all levels (hardware and applications) for better security (and other purposes as well). And the network really is the converging point for all systems.

    Technology providers are looking at the emerging category of “network intelligence” technology as a more widespread (and more practical) alternative to solve the security (and visibility) issue.

  2. This one has my scratching my head. Security these days comes in two basic forms: keeping people from breaking-in in the first place and, if they’re successful, from interpreting what they see. The theory and techniques are well known. While I applaud Intel’s efforts to provide security protection in hardware, the expensive acquisition of McAfee doesn’t bring anything unique in terms of security technology and certainly doesn’t bring much hardware experience to the table.

    Intel has been on a buying spree of late, I guess to stock up before any economic recovery jacks the prices, hoping the long term proves them wise.

  3. Hamranhansenhansen

    Except the hottest thing in ARM is iPhone and iPad and McAfee is irrelevant there because iOS does not have any viruses or malware. Apple users don’t know what a McAfee is. And when there was an exploit recently for iOS v4.0.1, Apple just shipped iOS v4.0.2 and iTunes put it on all the phones within days.

    I’m also not aware of any BlackBerry malware, or Nokia malware. Since Apple, RIM, and Nokia account for 90% of the profits in the mobile phone industry, they are the ones who are likely to still be around 2 years from now.

    Virus scanning is not compatible with mobile for the same reason background apps are suspect: battery life. You may be able to give over 10% of your limited CPU to a scanner, but you can’t give up 50% of your battery as it works away constantly.

    And as far as Intel chips, the Mac has been on Intel for 4-5 years and no viruses and only 3 minor Trojans that were solved by enabling the Mac OS to recognize them and not run them. Since the Mac OS updates itself regularly, replacing its own kernel every couple of months, those fixes spread to the community faster than anti-virus updates. There has never been a way for a commercial malware market to take hold because consistent updates are like when NYC started painting over graffiti on all subway cars before letting them roll. There was no longer any point in painting a car all night because it was never going to leave the yard without being painted over. On the Mac, there’s no point in making malware for v10.6.4 because it will be replaced with v10.6.5 in just weeks from now across almost all client systems. You don’t have a pool of 10 year old software to exploit like on Windows.

    So Intel could have bought NVIDIA for over $1 billion less and then they would have the new Tegra dual-ARM with GPU, and they would have an integrated PC GPU that doesn’t suck.

    Instead they got a company that puts band-aids on the weeping sores that Microsoft products ship with. And this is good for mobile? Microsoft doesn’t even have a mobile product right now. Yeah, Google’s mobile product has malware but there is no money in Android hardware or software at all, that is why there is malware, it’s the only software that can make money on Android.

    So count me as very, very skeptical of this.


  4. pk de cville

    “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.”

    Hitting the nail on the head there.

    I hope Intel and McAffee will do the innovative work to ensure the security of the internet completely. If they’re successful, they’ll make the $7B back in licensing and they’ll also have a huge PR win as they save the future of the internet from the expanding destructive power of marauding international gangs of criminal spammers, fraudsters, national security threats, and fund transfer artists.

    Wouldn’t it be great if the end to all hacking would finally arrive through Intel (or some other company)?