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Another Take on McAfee/Intel

A few moments ago Mike posted his take on the McAfee/Intel acquisition, and for the most part I agree with him. “For the most part” is my nice way of saying I think Mike nailed the surface but missed some of the depths.

Despite what they try to teach you in business school (not that I went to one), acquisitions, even among Very Big Companies, don’t always make sense. Often they are as much about emotion and groupthink as logic. Looking at Intel and McAfee I can see a way this deal makes sense, but I see some obstacles to making this work, and suspect they will materially reduce the value Intel can realize from this acquisition.

Intel wants to acquire McAfee for three primary reasons:

  1. The name: Yes, they could have bought some dinky startup or even a mid-sized firm for a fraction of what they paid for McAfee, but no one would know who they were. Within the security world there are a handful or two of household names; but when you span government, business, and consumers the only names are the guys that sell the most cardboard boxes at Costco and Wal-Mart: Synamtec and McAfee. If they want to market themselves as having a secure platform to the widest audience possible, only those two names bring instant recognition and trust. It doesn’t even matter what the product does. Trust me, RSA wouldn’t have gotten nearly the valuation they did in the EMC deal if it weren’t for the brand name and its penetration among enterprise buyers. And keep in mind that the US federal government basically only runs McAfee and Symantec on endpoints… which is, I suspect, another important factor. If you want to break into the soda game and have the cash, you buy Coke or Pepsi – not Shasta.
  2. Virtualization and cloud computing: There are some very significant long term issues with assuring the security of the hardware/software interface in cloud computing. Q: How can you secure and monitor a hypervisor with other software running on the same hardware? A: You can’t. How do you know your VM is even booting within a trusted environment? Intel has been working on these problems for years and announced partnerships years ago with McAfee, Symantec, and other security vendors. Now Intel can sell their chips and boards with a McAfee logo on them – but customers were always going to get the tools, so it’s not clear the deal really provides value here.
  3. Mobile computing: Meaning mobile phones, not laptops. There are billions more of these devices in the world than general purpose computers, and opportunities to embed more security into the platforms.

Now here’s why I don’t think Intel will ever see the full value they hope for:

  1. Symantec, EMC/RSA, and other security vendors will fight this tooth and nail. They need assurances that they will have the same access to platforms from the biggest chipmaker on the planet. A lot of tech lawyers are about to get new BMWs. Maybe even a Tesla or two in eco-conscious states.
  2. If they have to keep the platform open to competitors (and they will), then bundling is limited and will be closely monitored by the competition and governments – this isn’t only a U.S. issue.
  3. On the mobile side, as Andrew Jaquith explained so well, Apple/RIM/Microsoft control the platform and the security, not chipmakers. McAfee will still be the third party on those platforms, selling software, but consumers won’t be looking for the little logo on the phone if they either think it’s secure, it comes with a yellow logo, or they know they can install whatever they want later.

There’s one final angle I’m not as sure about – systems management. Maybe Intel really does want to get into the software game and increase revenue. Certainly McAfee E-Policy Orchestrator is capable of growing past security and into general management. The “green PC” language in their release and call hints in that direction, but I’m just not sure how much of a factor it is.

The major value in this deal is that Intel just branded themselves a security company across all market segments – consumer, government, and corporate. But in terms of increasing sales or grabbing full control over platform security (which would enable them to charge a premium), I don’t think this will work out.

The good news is that while I don’t think Intell will see the returns they want, I also don’t think this will hurt customers. Much of the integration was in process already (as it is with other McAfee competitors), and McAfee will probably otherwise run independently. Unlike a small vendor, they are big enough and differentiated enough from the rest of Intel to survive.

Probably.

—Rich

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By ken rutsky  on  08/19  at  04:10 PM

I think there are a few disruptive potentials here that aren’t getting much play…from my blog:

ere’s 4 potential disruptions that I see could come out of this transaction:

1) Disruption of AV market distribution .... OK, Andy Janquith may call PCs today’s horseless carraiges but there still a lotta PCs to be sold, with a lot of AV licenses to be had. Even before Intel moves AV to firmware, they can move incentives to Intel Inside, regulators notwithstanding. I worked on the I2 program at Intel, and it is a well oiled and managed machine. Intel will not be shy to use its significant marketing muscle to push MFE desktop share up.

Timeframe: Short after close
Likelihood: High
Potential Impact: Medium - with a nod to AJ

2) High perfomance silicon to MFE Network Security devices: Having access to Intel’s design and build silicon might has to have the FW/IPS/Web security guys at MFE drooling. Hi perf silicon can be a real differentiator in NW security, yet I’ve seen little discussion of this. Bandwidth, mobility and content all lead to need for hotter silicon on network security

Timeframe: 2-3 yrs
Likelihood: High
Potential Impact: High

3) Cloud Computing Security - What is it? A wide open playing field. Owning cloud servers and network security assets makes for an interesting mix. Not sure what to expect here, but I am sure smart people are thinking about it

Timeframe: 1-3 years
Likelihood: Not sure
Potential Impact: High or nothing, one to watch

4) MacIntelafee - Remember that Intel is a major supplier to Apple. Many in IT Sec think Apple products are the next horizon of for malware and cybersecurity risk. Yes, I know ARM plays a big role in Apple, but so does Intel. And what a better alliance against Google and a way to keep MSFT honest.

Timeframe - Hmmm
Likelihood - High that something happens
Impact - Time will tell


Cheers
Ken

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