Here’s some interesting news coming out of the corporate world of tech. Intel announced today it has reached a definitive agreement to acquire software security company, McAfee, for a total of $7.68 billion (or $48 dollars per share in cash). McAfee will continue to operate as a wholly-owned subsidiary, reporting directly into Intel’s Software and Services Group.
Why purchase McAfee? Here’s a couple of reasons why Intel made this move today:
Security is a fact of life and is a major priority at Intel.
Whether we like it or not, security is a fact of life in this day and age. We’re inundated with connected devices – everything from Bluetooth-enabled cars to Internet-enabled TVs to mobile devices such as smartphones and tablets to of course your standard PC. The common theme across all of these devices and components? They’re all viable targets for criminals.
Consequently as these devices become more pervasive in our lives so does the overall importance of security. Gone is the notion that we’re safe simply by installing a firewall and an anti-virus application. Threats can come in via so many different avenues and as such Intel clearly recognizes this as a business priority and of course a business opportunity.
Security expands Intel’s product mix.
Most of us think of Intel as a hardware company but the chip behemoth actually has a sizeable software presence too. Software is of incredible importance to Intel as it helps power their processor sales. There are whole divisions within Intel dedicated to helping third party application vendors optimize their code base for the Intel architecture. There are also groups within Intel dedicated to ensuring Intel processors work across a wide range of operating systems and applications thereby encouraging vendors choose Intel-based systems over competing architectures.
Adding McAfee into the mix expands Intel’s ever-expanding software portfolio and allows the company to become a near one-stop shop for software and hardware products/services. Want a new network storage appliance? How about one that comes with security software installed already? Need a firewall? How about one with McAfee security products built right in? Security fits nicely into their product portfolio.
Software is a predictable, high-margin business.
At the end of the day it’s all about business and the software biz can be a very predictable, high-margin business if you have a large customer base (which McAfee has). Some of you may not realize this but Intel almost never goes after products or businesses that doesn’t at least deliver 50 percent gross profit margins. McAfee delivers 80 percent gross margins. Not bad!!
But..
Now the only hitch we could think of at this time would be regulatory ones. Would Symantec or AVG Technologies stand up and complain the purchase is anti-competitive? Having McAfee closely aligned with Intel would certainly give McAfee a competitive edge – especially if Intel decides to marry McAfee software/services more closely with the hardware products. Competitors could claim this purchase would shut them out of markets and industries formerly open to them.
Interesting move by Intel but one that makes sense business wise.
