Intel-McAfee deal baffles security analysts

At first glance, acquisition of security software firm appears to make little sense for chip giant Intel

Several security analysts today expressed surprise that Intel would purchase security tool maker McAfee, noting that at first glance the move makes little sense for a pure hardware firm.

Intel Thursday agreed to buy McAfee for $7.68 billion, which analysts are calling a premium price tag.

"I'm baffled," said Peter Firstbrook an analyst with Gartner in Stamford, Conn. "I don't see any synergy at all between McAfee and Intel."

At best, he added, the acquisition could be a good venture capital investment for Intel. "And they may get a little cross R&D benefit from the deal as well," he said,

In fact, analysts said, the deal could prove beneficial to McAfee rivals like Symantec, Sophos and Trend Micro, at least in the short term. Each can be expected to move quickly to try and take advantage of a distracted McAfee prior to the deal's closing and during the integration phase, they said. "McAfee is going to be a little bit distracted for sure. It's probably good news for Symantec," and the other vendors, said Firstbrook.

Intel president and CEO Paul Otellini, said this morning that the acquisition was driven by Intel's belief that security has become a fundamental component of online computing.

"With the rapid expansion of growth across a vast array of Internet-connected devices, more and more of the elements of our lives have moved online," he said in a statement, adding that McASfee will bring to his firm "incredibly talented people with a track record of delivering security innovations, products and services ... [that are used to make] the Internet safer and more secure."

Intel said that McAfee will be a wholly owned subsidiary of Intel reporting into the Software and Services Group.

Firstbrook predicted that efforts to integrate McAfee's security technology into Intel hardware platforms will likely be a time consuming process, and noted that it could have been achieved more chickly and cheaply by simply partnering with security companies.

"It's a different product, it's a different market, it's a different customer base," Firstbrook said. "Intel moves in terms of quarters and years. McAfee has to move daily in terms of responding to [security] threats. One operates much higher in the stack. The other is much lower in the stack."

McAfee's enterprise customers are likely a bit puzzled by the move, said Andrew Jacquith, an analyst at Forrester Research in Cambridge, Mass.

"McAfee customers in many cases have reasons to be worried, and not just because of this deal," he said, noting that many users are already upset with McAfee over a flawed security update that crippled thousands of corporate PCs.

"In the wake of McAfee's DAT issue many customers were already looking for other suppliers," he said. Uncertainty over Intel's plans for McAfee "may accelerate that trend," he said.

Intel's purchase, though puzzling to the analyst community, is not the first time that a hardware company has purchased a security vendor.

For instance EMC purchased RSA in 2006, and IBM has gained security tools from Rational, Ounce Labs and WatchFire in recent years, Just this week, Hewlett-Packard said it had purchased Fortify, an application security vendor, for an undisclosed amount.

Pete Lindstrom, an analyst with Spire Security in Malvern, Pa., did say that the deal could help Intel diversify its business over the long term. "Intel is a big company flush with cash looking for ways to diversify. It's no secret Intel is interested in services, and McAfee has some interesting security services in the cloud," he said.

Jaikumar Vijayan covers data security and privacy issues, financial services security and e-voting for Computerworld. Follow Jaikumar on Twitter at @jaivijayan, or subscribe to Jaikumar's RSS feed . His e-mail address is

Copyright © 2010 IDG Communications, Inc.

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