Intel Looks to Pay a Hefty $7.68 Billion to Acquire McAfee’s Security Assets

Event Summary

August 19, 2010 -- Intel Corporation has entered into a definitive agreement to acquire McAfee, Inc. through the purchase of all of the company's common stock at $48 per share, in cash, for approximately $7.68 billion. Both boards of directors have unanimously approved the deal, which is expected to close after McAfee shareholder approval, regulatory clearances, and other customary conditions specified in the agreement. McAfee will become a wholly owned subsidiary of Intel, reporting into Intel's Software and Services Group, which is headed by Renée James, Intel Senior Vice President and GM of the group.

Quick Take

Analytical Summary

• Current Perspective: Moderate on Intel’s pending $7.68 billion acquisition of security vendor McAfee, because while the vision behind the move is clear, the path to success for both parties is far from straightforward. The chip maker can well afford the dear price it is paying to buy the security vendor, especially if it means that the groundwork for growth will be laid in key areas such as mobility. However, even as Intel and McAfee talk up the promise of embedding anti-virus and other security protections into silicon to support more stable online and mobile applications, the integration process will be complex and unwieldy — perhaps offering opportunities to competitors.

• Vendor Importance: Very high to Intel, because the processor vendor is making an outsized investment that is triple the amount of its next-largest acquisition to purchase a company that competes well outside the chip maker’s comfort zone. The expectation is the McAfee purchase will drive future revenue growth and profitability. The reality, however, is that this is a tricky endeavor which requires McAfee to be able to run independently to maintain its successful existing business, while at the same time finding ways to exploit the alleged benefits of security/silicon integration.

• Market Impact: High on the security market in the near term, because as Intel and McAfee sort through the issues associated with such a massive merger, rival security providers will be able to capitalize on their diversion to position themselves as more stable alternatives to McAfee. Additionally, security software suppliers such as Symantec may find themselves getting otherwise unexpected or unwanted attention from various types of suitors intrigued by Intel’s rationale.

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