Intel to acquire security vendor McAfee for $7.7bn

Intel, the world’s largest manufacturer of microprocessors, is to acquire McAfee, the world’s largest dedicated IT security vendor, for $7.7 billion.

Although Intel builds security features into its chips and sells certain infrastructure products with security capabilities, the McAfee acquisition nevertheless represents a radical diversification for the company.

In a statement explaining the deal, Intel president and CEO Paul Otellini said that security was becoming an increasingly integral feature of computer systems. “In the past, energy-efficient performance and connectivity have defined computing requirements,” he said. “Looking forward, security will join those as a third pillar of what people demand from all computing experiences.”

‘This acquisition is consistent with our software and services strategy to deliver an outstanding computing experience in fast-growing business areas, especially around the move to wireless mobility,” he added.

Critics might wonder why Intel, whose products are so fundamental to IT systems that its business performance is seen as a lead indicator for entire industry, needs to undertake such a drastic departure from its traditional line of business.

Last month, the company reported what it described as its “best quarter ever”, in which revenues grew 32% year-on-year to $10.8 billion and net income rose to $2.9 million, the highest quarterly profit figure for the company in a decade.

However, analysts predict that once pent up demand for PCs and laptops held over during the recession is exhausted, chip sales will again decline. “The hyper-growth already exhibited through [the first half] of 2010 cannot be sustained because the poor macroeconomic climate could not support 50%+ semiconductor growth,” wrote Dr. Robert N. Castellano, president of US market research company The Information Network, earlier this week.

Last week, investment analysts Robert W. Baird & Co. downgraded their rating for Intel in light of evidence of weakening demand for PCs. “We see the weakness more so on the consumer side, even though we hear of some weakness in enterprise as well, notably from Europe,” analyst Tristan Gerra told the Associated Press.

McAfee saw its revenues grow by 4% year-on-year to $489.2 million in its most recent financial quarter, a stronger perfomance than investment analysts had expected.

There has been considerable consolidation in the IT security market of late. This week, Hewlett-Packard announced its intention to acquire application security vendor Fortify. Security giant Symantec, meanwhile, has shored up a number suppliers in the space this year, including Verisign’s certification business.

Intel’s acquisition of McAfee is subject to regulatory approval.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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