Intel to acquire McAfee in US$7.7 billion cash deal

Chipmaker Intel Corp. (NASDAQ: INTC) announced a definitive agreement Thursday to acquire security vendor McAfee Corp. (NYSE: MFE) in a deal worth US$7.7 billion in cash. The deal appears designed to beef-up Intel’s security services credentials in a computing era that sees the chipset playing an ever-more pervasive role.

The definitive agreement, which has the approval of both Intel and McAfee’s boards of directors, sees Intel offering US$48 per McAfee share, representing a premium of 60 per cent over McAfee’s closing price Wednesday of $29.93. The deal is pending approval by McAfee’s shareholders, as well as regulatory authorities.

In a statement, Intel said the acquisition reflects that security is now a fundamental component of online computing. Intel wants to bring computing security down to the chipset level, calling it “hardware-enhanced security,” and Intel will make security a strategic priority for the company alongside performance and energy-efficiency.

“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,” said Paul Otellini, Intel president and CEO, in a statement. “The addition of McAfee products and technologies into the Intel computing portfolio brings us incredibly talented people with a track record of delivering security innovations, products and services that the industry and consumers trust to make connecting to the Internet safer and more secure,” Otellini added.

Once the deal closes, Intel indicates McAfee will operate as a wholly-owned subsidiary of Intel, reporting into Intel’s Software and Services Group.

The acquisition won’t mean the end of boxed security software said James Alexander, senior vice-president with London, Ont.-based Info Tech Research Group. However, embedded security on the chipset is the way forward.

“At some level you’ll still see both, but I think it will begin to be embedded. Intel has been on that path for some time, whether it’s with IPS or biometrics,” said Alexander. “As we get into the world of the cloud, everything will be much more appliance-like.”

The deal is consistent with McAfee CEO Dave DeWalt‘s vision of moving McAfee from protecting millions of laptops and desktops to billions of devices with an Internet connection as mobile computing becomes the pervasive way of getting online, said Alexander. And with access to Intel’s engineering and R&D, McAfee will be able to write more effective, and efficient software.

“Intel also gets access to McAfee’s software to embed security at the chip level. Think about an i7 or i9, where you can take one core and devote the entire processor to running anti-malware and security,” said Alexander. “Now you have native security built into the processor.”

For McAfee competitors such as Symantec Corp., Alexander said they’ll need to consider cozying-up to someone. Intel-competitor AMD Inc. will also be considering its options.

In the channel, it will likely be business as usual for now, said Alexander. There will be very little overlap, with McAfee’s channel tilted toward the reseller and solution provider side, and Intel’s weighted toward the original equipment manufacturer and system builder community. But going forward, he said with access to Intel’s research and development resources, and greater fiscal capacity, we could see McAfee partners offered new innovative solutions to bring to market.

David Senf, research director, infrastructure solutions with analyst firm IDC Canada, said building on security functionality at chip-level and through standalone software will help Intel and its partners protect margins. He added, the more computing is secure right out of the box, the more boxes get sold – with Intel chips inside.

“The IT industry consolidation continues as vendors endeavor to defend their core position by selling more of the stack,” said Senf. “For Intel, security is not new – they embedded security functionality in chips years ago with Trusted Platform Module.”

The acquisition is Intel’s largest since 1999, when it acquired Level One Communications for US$2.2 billion. It has a diverse suite of both consumer and enterprise offerings, including McAfee Total Protection, McAfee Antivirus, McAfee Internet Security, McAfee Firewall and McAfee IPS.

McAfee’s go-to-market has been strongly through the channel, and its channel program was revamped for 2010 by channel chief Alex Thurber. In Canada, McAfee has been led since 2008 by general manager Ross Allen, a channel veteran who formerly led InfoStream Technologies, a Richmond Hill , Ont.-based systems integrator, and held executive positions with EMC Corp. and Copan Systems.

Follow Jeff Jedras on Twitter: @JeffJedrasCDN.

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Jeff Jedras
Jeff Jedras
A veteran technology and business journalist, Jeff Jedras began his career in technology journalism in the late 1990s, covering the booming (and later busting) Ottawa technology sector for Silicon Valley North and the Ottawa Business Journal, as well as everything from municipal politics to real estate. He later covered the technology scene in Vancouver before joining IT World Canada in Toronto in 2005, covering enterprise IT for ComputerWorld Canada. He would go on to cover the channel as an assistant editor with CDN. His writing has appeared in the Vancouver Sun, the Ottawa Citizen and a wide range of industry trade publications.

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