SAN FRANCISCO — Intel Corp.'s proposed $7.68 billion acquisition of security software vendor McAfee Inc. moves the No. 1 chip vendor further down a diversification path that could eventually see the company relying less on chip sales and more on software and consulting services, according to a Wall Street analyst.
"Over the long term, concerns about the potential slowing of Moore's Law could drive Intel to increasingly diversify away from just chips, and more towards software and consulting services—something closer to the IBM model," wrote Craig Berger, an analyst with FBR Capital Markets, in a report circulated Thursday (Aug. 19).
"If Intel does pursue this business strategy, we could expect to see a host of other acquisitions that build scale for Intel's software and services division," Berger said
Intel (Santa Clara, Calif.) said Thursday it entered into a definitive agreement to acquire McAfee for $48 per share in cash, a 60 percent premium over McAfee's closing price of $29.93 Wednesday. Both companies' board of directors unanimously approved the deal, Intel said.
Intel said it has made a series of recent software acquisitions "to pursue a deliberate strategy focused on leading companies in their industry delivering software that takes advantage of silicon." The company said it would integrate McAfee technology into its chips to enhance security. Providing security in an increasingly online world "requires a fundamentally new approach involving software, hardware and services," the company added.
"Hardware-enhanced security will lead to breakthroughs in effectively countering the increasingly sophisticated threats of today and tomorrow," said Renée James, Intel senior vice president and general manager of the company's Software and Services Group. "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."
McAfee will operate as a wholly-owned subsidiary, reporting into the Software and Services Group, Intel said.
Meanwhile, Berger noted that there has been increasing speculation that Intel is a likely buyer of Infineon AG's baseband business. Earlier this month, analyst Will Strauss of Forward Concepts Inc. said Intel is the most likely buyer for business, though he added that Broadcom Corp. would be a better fit and that Samsung Electronics Co. Ltd. is clearly interested. Intel also announced earlier this week it would buy Texas Instruments Inc.'s cable modem product line for undisclosed terms.
Berger said an Intel buy of Infineon's baseband business would have both positive and negative implications for Intel. It would give Intel a sizable presence in the cellular baseband market with customers including Apple Inc. and Nokia, as well as access to solid ARM Technology Holding plc cores, Berger said. But he added that Intel does not have a great track record of success outside of its core Intel architecture and said involvement in the baseband business could be a distraction for management.
"Touting Atom chips and ARM based-chips could be somewhat confusing to customers," Berger said.
Berger maintains a "market perform" rating on Intel stock, equivalent to "hold." Intel's stock declined in the wake of the deal, shedding 3.6 percent of its value to trade at $18.99 in afternoon trading Thursday.
Intel has security feature like hardware random number generator built into the firmware hub. It can be foreseen that a more secure CPU is needed for better e-commerce operation.
Whatever insight McAfee can offer will enhance the Internet in general and Intel in particular... Imagine a virus free CPU by design...
You may need to separate the program memory & data memory space to reduce risk from buffer overflow attacks. Switching from VonNeumann to Harvard may be a way to do it but has to maintain compatibility with legacy software... Not straightforward but do-able with a MMU probably...
According to an online article that I read this morning, it stated that Intel and McAfee have been working closely on a host of projects for 18 months and expect to show the first fruits of their labor early next year. This doesn’t sound these two companies that have not been communicating about different approaches; IBM model approach may be one that is on the table. But I am sure it is not the only one. I don’t believe that a company is going to invest all of it resources toward one model? If so, I am sure the Board of Director’s members will be voted out today by the stock holders.
I am equally puzzled here. Its Microsoft software which need AV software, why is Intel fixing the problem using hardware. For people using Linux on Intel, this is useless hardware and for people using AMD with Microsoft its equally in-secure. So what is getting solved here?
Moreover AV is software that need daily upgrades, so the only hardware Intel can develop is special instruction sets to off-load processor during file access. If that's what is Intel plan, then it might increase cost of process pushing more Linux servers users towards AMD and I am pretty sure there will be a bigger crowd which will tend to save few buck at cost of AV run time.
I am sure we can all find a rational explanation for this acquisition (future hardware-enhanced security of Intel chips, better secure server solutions etc.) but I have a feeling this is just another sign of Intel not knowing exactly where it wants to be in the future. Such costly purchases could come back to bite them in the future as it might distract Intel from their core business and reduce their financial muscle in the high-end microprocessor market.
It remains an illusion that Intel despite all the high buyouts and acquisitions have not rewarded shareholders through good stock acquisition. I always doubt this firm because it has many ethical challenges. But in this case, it may be reinventing itself.
I think we should take Intel at their word when they talk about 'Hardware-enhanced security...'.
Ineffective security is a serious problem that I'm sure hardware could help solve. I can see McAfee engineers saying, 'if the cpu or chip set could only ...'.
One example of what X86 could do is support buffer allocation with boundary check in hardware. Intel can set an example with their compilers supporting such capabilities.
Security should be re-thought from the ground up. Hardware, OS and security need to seamlessly cooperate. I believe the experience of a company such as McAfee could contribute greatly in this area.
Intel seems to be getting more and more defocused, with all these various acquisitions. The thing about security risks like viruses is that they always evolve to defeat the latest defenses. Hardware isn't flexible or fast enough to adapt, compared to software. So this nearly 8 billion purchase is totally unrelated to its 7 billion for latest fabs. Security is a software, not hardware responsibility.
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