Intel + McAfee = Desperate mobile move

In grabbing the security vendor, chip giant Intel may be using McAfee as a back door into mobile devices

Intel has stunned the security industry in announcing that it will acquire security giant McAfee in a $7.7 billion purchase. In justifying the acquisition, Intel president and CEO Paul Otellini declared that security has become a "third pillar of what people demand from all computing experiences." And in a blog post, McAfee CEO Dave DeWalt suggested that the desire to develop end-to-end mobile security was part of the motivation.

Yet the deal is far from logical. The acquisition has surprised industry watchers. Gartner analyst Ruggero Contu told InfoWorld that McAfee was a logical takeover target -- just not for Intel. Previously, other market watchers had speculated that Hewlett-Packard might be the eventual acquirer.

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There is no clear combination of security technology and Intel's products that would justify the risk of alienating other software and system makers. If Intel sought security talent -- people in short supply these days -- any number of smaller companies could have been acquired to fill the chip giant's ranks.

"The underlying expertise in security they get is worth a lot," saed Rainer Gawlick, chief marketing officer and acquisitions specialist at antivirus firm Sophos, a McAfee rival. But, he says, "I'm not sure why you pay $7.7 billion for that."

Sure, security has been a bright spot in this recession. For example, McAfee boasts of annual double-digit growth for the last two years and nearly 80 percent gross margins last year. Mobile threats are also on the rise, as mobile applications have been another bright spot, driven by the success of the iPhone, iPad, and Android OS.

Clearly Intel -- which has fallen behind in the mobile chip market -- sees security as a way to get in on the smartphone madness. Smartphones are forecast to surpass PCs in 2011, and mobile devices will become the most popular way to access the Web in 2013, according to Gartner.

The acquisition could indicate Intel is desperate, even panicking, to get a chip on every phone. The company gave mobile far more ink in its press release than other consumer technologies. "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," said Renée James, a senior vice president at Intel and the general manager of the group that will absorb McAfee.

In the end, McAfee may get a better deal from Intel but a better future from an acquirer such as HP. A high-level system and service vendor would avoid the sticky situation that Intel now finds itself in. It's certainly true that security has become a pillar of modern information technology -- and Intel's assertion that it's a third pillar is a good one -- but a platform vendor tying itself to a single software provider is always a risky proposition. The chip maker has to be sure that this deal does not turn its third pillar into a third rail.

This story, "Intel + McAfee = Desperate mobile move," was originally published at InfoWorld.com. Get the first word on important tech news with the InfoWorld Tech Watch blog.

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