Yesterday Intel took most of the security industry by surprise by announcing a $7.68 billion acquisition of McAfee. The party line justification from Intel was that security will become the third major element of differentiation in Intel’s processor franchise, along with energy-efficient performance and connectivity. The near term beneficiaries seem to be McAfee shareholders as the market reacted by driving McAfee up some 60%.
I think the most significant implication of this deal is that it another example of the fact that security is viewed by enterprise customers as part of a broader IT stack. Over time security technology will find its way into the broader computing and communications ecosystem. Certainly, Intel has current IT system management initiatives such as vPro that will benefit from security technology integration but that’s hardly enough reason to spend nearly $8M on a $2M revenue stream.
Intel’s mindset is and for many years now has been about protecting and growing the market opportunity for the x86 franchise. While the server business is doing well, the major growth business over the next several years is in mobile devices (or more specifically phones). The problem for Intel is that the dominant processor architecture in that market is not x86, but ARM. ARM has recently aligned with Microsoft thus creating a schism in the partnership that worked so well in building the PC ecosystem. So now, with the McAfee acquisition, Intel has a brand that is strongly associated with security and mechanism to use security as means to disrupt the next great target market.
Will it work? That’s hard to say. The phone market is different in that the dominant players such as Apple and RIM control the OS. One could argue that this is the right place for security capability to live and that the horizontal view of the market that makes Intel comfortable just isn’t reality.
Was McAfee a good choice? I would argue that there really wasn’t much of a choice once Intel convinced itself that security could become a differentiating element for the x86 architecture. Intel is a big McAfee customer for desktop protection, but I can assure you this move had little to do with technical merits. In this case brand was as important as technical merit.
What does it mean for enterprise customers? Probably not that much in the near term other than that as the deal goes through the approval process over the next few quarters McAfee will have to continue to make its numbers, so it’s a great time to negotiate favorable licensing terms with them.