Intel acquision of McAfee a head-scratcher

Embedding security in hardware isn't new, but is it worth an $8 billion investment? Time will tell on the Intel-McAfee acquisition.

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So it finally happened. McAfee, the biggest security-only technology company left out there, has been acquired; and not by HP, nor IBM, nor even Symantec. Chipmaker Intel turned out to be the best suitor and had the biggest dowry, paying a 60-percent premium for the privilege of bringing software security to hardware. Close to 8 billion bucks for McAfee. Wow.

Or is it: Why?

Intel president and CEO Paul S. Otellini says the deal is all about embedding security inside of Internet-enabled devices--everything from processors running PCs and laptops, to smartphones, ATMs, televisions and yes, even, your car (now that's mobile computing). McAfee CEO Dave DeWalt points out that his company's Web reputation and cloud-virtualization security capabilities are a good fit with Intel's chips. Intel software and services VP and GM Renee J. James says the deal makes Intel a security player.

"The way to think about this is we'll develop enhanced security solutions created only by our unique hardware innovations in combination with the software McAfee sells today," James says.

So this is how the security revolution really kicks in? You know which revolution I'm talking about: the one where security is embedded in everything. That promise has been festering for many years now as technology companies such as EMC, Microsoft, Google, IBM, HP and many others have scooped up security startups and stalwarts alike. Now Intel comes along and pays a whopping $48 a share for McAfee to integrate software security into hardware, and lunge headfirst into mobile computing and even cloud services.

On the surface maybe there's merit, but dive a few meters down and the water's pretty murky.

Intel has almost no mobile software story to speak of and to spend billions on a security company in order to plunge deeper into mobility sends a guy's jaw downward. Last year, Intel set the stage for the McAfee deal by picking up embedded and mobile software maker WindRiver. While it's still relatively early to judge the WindRiver deal, it's not like Intel can lean back on a stellar record with software acquisitions -- hello, LanDESK.

Otellini and James point out that McAfee has been collaborating with Intel for more than 18 months on product development. Intel has similar relationships with other security and technology companies. And that makes for another big rub here. Intel promises tight integration with McAfee, but what about RSA, Symantec and many others that already have deals in place to access the Intel platform with their respective products?

Just this year, RSA Security, VMware and Intel teamed on a secure cloud architecture which includes the speedy Westmere chips from Intel that feature instructions specifically designed to quicken encryption, decryption and transmission speeds. It also includes secure virtualization capabilities from VMware and SIM and GRC from RSA. Symantec, meanwhile, also has a longstanding partnership with Intel around virtualization and sandboxing. What of those relationships? And how will this impact all that innovation McIntel (IntelAfee?) has planned?

The biggest head-scratcher of a question is why: Why buy McAfee? Why not partner? Financial analysts asked the Intel braintrust just that, and the answer amounted to marketing mumbo-jumbo and how security software integrated into chipsets add value and differentiation for Intel. OK. I guess. As with any large transaction, there are tons of integration and strategic questions to be answered, and the answers are too far down the line for McAfee customers to be worried about now in the short term.

Longterm, however, McAfee customers may have some concerns. This hasn't been a good year for the company, despite recent years of post-stock scandal growth and gains against Symantec, its biggest competitor. The company's biggest sin came in April when a faulty McAfee antivirus update shut down Windows XP computers, took them offline and caused constant reboots. Unplanned downtime is a bummer for corporations and any of those up for renewals this time of year now have to worry about acquisition tribulations. What if Intel blows this and McAfee becomes an afterthought in coming years? What if the focus on hardware integration deters from the gains the company has made as a software leader? Legitimate questions lead to legitimate hesitation that only stands to benefit Symantec, Trend Micro, Sophos and the other security software vendors waiting in the wings with discounts and partnership offers.

In the end, maybe Intel is way ahead of conventional thinking here. Maybe security software embedded in hardware is the real revolution and maybe McAfee operating as a wholly owned subsidiary will remain an innovative security provider.

And maybe this Intel-McAfee deal won't take its place in the annals of other shaky acquisitions such as HP-Compaq and Symantec-Veritas. And maybe, in a couple of years, we won't be asking why.

Michael S. Mimoso is editorial eirector of the Security Media Group at TechTarget. Send comments on this column to feedback@infosecuritymag.com.

This was first published in September 2010

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