Intel, McAfee deal takes industry observers by surprise

Intel (NASDAQ: INTC) entered into an agreement to acquire security software giant McAfee for $7.68 billion in cash, the companies announced, to the surprise of many industry observers. McAfee will become a stand-alone subsidiary of Intel, and its leadership may remain intact. The companies said that by joining forces they can better combat today's cybersecurity issues, which require "a fundamentally new approach to security"--mainly by integrating security into hardware via chips.

"Frankly, the industry needed a paradigm shift--incremental improvements simply couldn't bridge the opportunity gap. McAfee and Intel Corporation are joining forces to tackle this next generation cybersecurity issue which impacts everyone and anything connecting to the Internet," the two companies said in a joint news release.

Although it should have been obvious all along that security needed to be a fundamental part of online computing, the emphasis on synthesizing a device's software, hardware and services is "a pretty enlightened viewpoint (at last!) and implies that future Intel chips will be designed with at least one eye on how chip-level technology can influence the online safety and security of PC owners," writes Kit Eaton at FastCompany.

Venturing into a bit of conspiracy theory, Eaton notes that there will always be money in getting rid of infections on PCs. "If Intel makes the CPU of your PC, and now owns one of the biggest anti-virus software firms, is there any financial incentive for future McAfee's to be 100 percent effective in ridding your PC of malware?" she asks.

Conspiracy theories aside, the wisdom of the acquisition is not immediately apparent to some industry observers. Some are questioning the high premium that Intel is paying out, notes Andy Greenberg in a post at Forbes. The growing ubiquity of mobile devices may not prove to be a hot market for antivirus software because of the fractured nature of mobile operating systems and the relatively low instance of viruses on the devices. "If Intel is thinking that McAfee will help it gain more traction in mobile, it's making some risky bets," Greenberg writes.

Some analysts speculate that Intel may be able to leverage its power in the PC market to persuade manufacturers to preload McAfee software, Greenberg notes.  Others argue, however, that that type of bundling strategy could raise anti-trust red flags.

The deal appears to target ARM Holdings, which sells processing technology that is standard for mobile devices, writes Ryan Kim, in a post at The San Francisco Chronicle. "Intel seems to be suggesting that depending on ARM designs may not be a good idea if security becomes an issue," Kim writes. "It's not really a huge concern now but Intel is trying to get out ahead of it. Or maybe, it's creating a market by hyping the issue."

While Intel does not make large acquisitions frequently, it has "a history of dabbling in, and retreating from, markets outside its core business of building computer microprocessors," writes Jordan Robertson in a post at Huffington Post. "It once even had a toy division that made microscopes and other gadgets before giving up on it because of poor sales." Recently, the company has bought a number of software companies, including in the fields of gaming and visual computing.

For more:
- see Intel, McAfee news release
- see Kit Eaton's post at FastCompany
- see Andy Greenberg's post at Forbes
- see Ryan Kim's post at The San Francisco Chronicle
- see Jordan Robertson's post at Huffington Post

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