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Intel to buy McAfee for $7.7 Billion (dealbook.blogs.nytimes.com)
136 points by kvs on Aug 19, 2010 | hide | past | web | favorite | 118 comments



Why would they do this? It seemed obvious to me than in 5-10 years Antivirus software would be obsolete and unnecessary. I hear people every day recommending Windows 7 users get Microsoft Security Essentials and nothing else. And personally I run Ubuntu, so I haven't thought about antivirus software in years...

This seems like a very odd decision to me. Intel, a world leader in processor design, does not need to get into such a sleazy business as antivirus software.

Why not spend that $7.7 billion helping the world write better code?


McAfee do more than just desktop antivirus: for example, they have mobile, virtualisation and network security products. see products by category here: http://www.mcafee.com/uk/enterprise/index.html

Intel has a large interest in mobile, virtualisation and network arenas; this isn't really as surprising as you make out.


McAfee also has strong UI programming expertise that Intel sorely needed. Intel's IPP and MKL libraries are absolutely great, but VTune looks like it is fresh out of 2002. They get access to several stable revenue streams (like antivirus), and can cherry-pick talent to work on whatever projects they want. There aren't many downsides for Intel.


We're talking about $7.7 billion. I'm not sure it's quite as rosy a picture as you paint. I'm not that familiar with McAfee's annual profits, but even if they make $500 million a year, we can value the talent they cherry-pick at an absurdly high value of $1 billion, and it would still take Intel well over 10 years to recoup the investment, assuming stable revenue streams.


A simplified perpetuity of $175m @ 6% would have a PV of ~= 3b. I'm having trouble seeing how they'd ever break even based on profits alone. I just can't imagine what kind of integration with existing products they think will add another 4.7b.


6% seems a little high given the current climate, no? Take that down to 3% and you're in the neighborhood of the deal price.

Still not sure if I agree with the deal, and it does seem driven by a bunch of cash burning a hole in Intel's pocket.


$173 million in 2009, up from $172 in 2008 and $166 in 2007. It seems odd to make an assumption when the real answer is seconds away!


Thanks, I was about to head into a meeting and didn't have time to do the research. Assuming $175 million in profits per year, that means 44 years to breakeven, ignoring the talent acquisition angle. How much are 20 (or even 50) good programmers worth?


They would be ecstatic with that kind of return. Without growth and still making a hefty return. McAfee has ~$2b in revenue but an operating income of "just" $221m.


http://online.wsj.com/article/SB1000142405274870447610457543...

Intel's stock only took a small dip, and it looks like some of those who left were shifting it to McAfee to ride the wave as the stock went up.

That's a lot of investors in an otherwise volatile market not jumping ship, so they must see something good in the deal that we're missing.


Either that, or stock market prices are much less connected to business fundamentals than one would hope.


Small dip??? Intel lost $3.5 billion in market cap on the news. McAfee gained $2.6 billion.


$3.5b is a big number, but it's only 3% of their market cap.

http://www.google.com/finance?client=ob&q=NASDAQ:INTC

Several other companies in that market went down a similar amount, so it doesn't seem to be extraordinary. I would expect a lot of tech investors to move their money to McAffe after that announcement hoping to get something out of it.

What matters is what happens after now. If it continues to go down for a long time, it might be a problem.


Are you kidding me? McAfee creates great UIs? Since when?


$7.7Bn is a lot of UI programming expertise... As in, how many salary/years is that at market rates?


7.7 Billion dollars for UI design?

It seems strange that Intel is investing in this particular sector that leverages mostly Windows stuff. They should move out of Steve Ballmer's basement and make their own OS.

Why do they want to make software for platforms when their competencies are on hardware?

One that doesn't look like a antivirus program for Windows.


I don't really get how you can write:

"They should move out of Steve Ballmer's basement and make their own OS." and "Why do they want to make software for platforms when their competencies are on hardware?" at the same time.


They're leapfrogging to a niche market of going from hardware to security on the Windows platform. What's the gain in getting into an specific platform's flaws (antivirus) and development environment? That's the corner of the platform itself, not to mention the scope of the OS industry.

If they want to do software, they should develop a OS, maybe for Atom or some kind of mobile platform or otherwise.

Antivirus is back and to the left.


> If they want to do software, they should develop a OS,

> maybe for Atom or some kind of mobile platform or otherwise.

I believe that's MeeGo (http://meego.com/).


My bullet points are just pointing out some icing on the cake that comes with the deal.

"Why do they want to make software for platforms when their competencies are on hardware?"

Vendor lock-in and community are just as helpful for Intel as they are for other businesses. If they can grease the wheels for their primary business (even at a small loss), then it's not necessarily a bad idea.


They should move out of Steve Ballmer's basement and make their own OS.

Yeah, that won't have antitrust implications, or anything.


Would it? I don't think so. Which part of the antitrust laws would that violate?

http://en.wikipedia.org/wiki/United_States_antitrust_law


Intel decided to do a public good, and plans to remove all McAfee antivirus software from the planet.


Is McAfee really that bad?


In April they issued an update that accidentally targeted legitimate Windows system files, causing the updated boxes to bluescreen. Astounding enterprise-level incompetence.


That might be excusable once (not really), but the problem is they do it every 3 months. Seriously, stay away from this stuff.


Oh yeah, McAFee has given blue screen to me many times. I bought Dell laptop for me and my gf. After McAFee free one year subscription expired, we decided to move to different anti virus. Once we uninstalled McAfee, both of our laptops got blue screens and crashed. My friend also had same experience with two of his computers.


This happened to me too just this past week; the only resolution was a full system restore. Pretty shocking.


From what I've heard, Intel HQ was hit by this as well.


maybe they weighed their options, and found that buying the company straight for 7 billion is cheaper than suffering through more downtime caused by McAfee software.


After buying Secure Computing and then discontinuing the SnapGear I know I'm not terribly happy with them.


Snap Gear was awesome. Used an SG565 for some research we were doing. Best wireless router/UTM I have ever owned.

Disclosure: Used to work for Secure Computing, but not the snapgear division.


McAfee is a resource hog.


I'm definitely biased as a MS employee, but I can't underscore enough MSE as an Antivirus solution - it's the least annoying AV on the market and has the least perf impact on your system. Literally, you install it and it only bothers you when it absolutely has to.


100% agreed. I don't work for MS but I honestly didn't run av software at all until MSE. It's the Google Chrome of AV software.


can you convince my workplace to dump Symantec and start using MSE?


Probably not; sane people dropped Symantec around the time when norton 2000 came out.


Well what worries me is mostly "what's going to happen to my job now?" I'm not some higher-up so... outlook isn't great. I've seen enough mergers to know how that usually goes.

So! I'm officially bad luck with businesses (was around just as CompUSA got liquidated, now McAfee acquisition), anyone wanna hire an MIS major with a burning desire to learn stuff solely for the sake of learning?

But in all seriousness, I've been speculating over the reasoning behind Intel doing this, and haven't come to many conclusions. As some others here have stated, McAfee actually has quite comprehensive network security (I've obviously seen the network layouts / architectures), etc, and maybe Intel just wants to try and market that?

I have yet to come up with a good reason - they are pretty disparate companies from what I can tell. There are "some" common grounds, but not many.


My guess is that they will be able to use their existing OEM relationships to push for McAfee to be installed by default (and paid for, not just a trial) on more and more computers.

McAfee also seems to be moving into different areas of computer security lately (PCI scans, etc), so it's not just anti-virus. I am not sure what % of their business this is though.


I thought unwanted default installs are the only way McAfee ends up on computers anyway.


If that's what it's called when network admins put on their default build images, then yes.


And corporate sales (writing this from a corporate PC with McAfee installed).

At least it's not obnoxious.


but it does bring a machine to its knees compared to the Microsoft Security Essentials product


Is McAfee really worthier than Sun? If IBM took a deal with Sun at that high, the Sun would have moved around the earth and Oracle doesn't stand a chance to slur the OS community!


Google != OS community


I work at a small antivirus company. I'd be interested in knowing how helping people whose computers are infected get them uninfected is a "sleazy business".


You're probably encountering one of those hard to shake off guilt-by-association theories, and working in the field, I'd be surprised if you are genuinely unaware of it.

To most people, computer security is a mystery box inhabited by criminals who try and break in, and Mafia-like organizations who offer protection for a fee.


Last week I spent two solid days rebuilding from scratch my mom's PC from it's OEM Windows XP Home installation after some hostage type malware managed to defeat it's not quite state of the art defenses (e.g. AVG). You aren't doing anything sleazy at all assuming your stuff is really good (that includes your not working for AVG :-).


Maybe McAfee has a patent portfolio that Intel fancies some use for?


I think this is indicative of a real risk we will see with large corporations right now. Many of these large cap companies have huge cash hordes and are being pressured to do something with it. The risk is that the cash will be used stupidly to do poor deals and I think the market is indicating that this McAfee deal is a bad one.

Their shareholders would have probably been better suited with a special $7B dividend instead.


Not necessarily - I think it has the potential to be a very good move for Intel.

I thought about my last post more, and I can think of a few applications where it could give Intel some huge advantages.

Something that came to mind: We all agree that AV software eats CPU cycles. What's to say Intel can't just start putting custom hardware that is designed solely to offload signature checking onto a separate chip? With the increasing sizes of detection databases (anomalies, threats, etc), eventually it will get to a point where the typical CPU cannot feasibly cross-reference known threats AND perform proactive checking in a fast enough environment to make it useful.

Not to mention network detection via the same means. Pretty soon you will be seeing motherboards or at least CPUs that have other dedicated hardware to checking signature sets on an extremely fast basis versus having to try and mix other, non-security-related cycles with what I'll call "user" cycles.


No thank you! AV software is not security, it's a stopgap measure for when you have to "do something" but are too lazy to implement real security measures. And McAfee is one of the lowest quality AV vendors out there (remember when they pushed out a definition update that made XP instances unbootable? that costs a lot of people a lot of headache, and millions of dollars).


It isn't software at that point as you would normally think of it - it would be a dedicated hardware piece that simply cross-references signatures with a known detection library and reports to the Intel chip.

And you think end users have any grasp of how to implement "real" security measures? Oh hell no. Joe Schmoe at XYZ web design corp is inevitably gonna download that porn at work and get some worm.


Agreed. Just wait till they push the signature to the flash om some special chip that calls a vital windows binary a virus. Not only will you not be able to boot, you won't even be able to reinstall, or pxe-boot, or run a live cd...

Thats one deep rabbit hole.


Aye. And imagine how much damage false-positives can have on smaller software companies. A company like MS runs all of its binaries through the major virus scanners as a matter of course for any release build, not just to check for viruses but to make sure that they don't get tagged by a broken heuristic detector or some such. But not every company has that luxury (and even so, it didn't save XP from McAfee's blunder).

Besides which, all AV amounts to variations on turd polishing. You'll never achieve robust security through black-list methods.


I think you're on the right track, but I don't believe this is about AV on the desktop. Enterprise-grade AV is a much bigger business, and tends to get pushed in to categories like IDS/IPS, web proxies, and email scanning. This all of happens "in the network" before packets ever hit your pc. It's extremely regex heavy, and in order to scan at high data rates we often rely on purpose-built regex accelerator cards.


And yes, true.

But for end-users that aren't behind a corp firewall / NAT / etc, this is an easy solution that they don't have to worry about.

Out of sight, out of mind (CPU cycles) sells, unfortunately.


This makes perfect sense and will further drive us to buy more and "better" hardware. The software will slow down the comp so much so that you'll want to continually buy new hardware in the hopes of making things run faster! Intel is an evil genius.


...for a 60% price premium.

Right now, large companies have so much cash available to them, on such attractive terms, that acquisitions don't have to be a terribly good fit to be attractive. It's just time to buy.


How about paying dividends?


I think there's a bit of an agency problem on that one. Paying large dividends to return cash is sometimes a good choice for investors, but some executives, especially in tech, see it as some kind of failure: you're doing the opposite of an IPO, giving money back because you admit you don't know what to do with it! A bold new move is more interesting from an empire-building point of view.


No wonder the only winners are usually the banks and legal advisors, and sometimes senior management at the acquired company. As an INTC shareholder I am pissed about this. A 60% premium? WTF.


Or buying back shares.


Same thing, modulo tax treatment and accounting.


That's a big modulo though, most investors react differently to the two.


Oracle bought Sun for $7B. Sun sold out way too early.


And it's not like they're motivated to start hiring or anything.


Lost all remaining respect for Intel with this bone-headed move. McAfee and Intel headquarters are within walking distance of each other. Perhaps the CEOs met for a few drinks at Birks and decided to do this. Make absolutely no sense at all.


Intel just bought Texas Instruments cable modem division so maybe they're looking to make a big push into the CPE market? x86 all-in-one gateways with embedded security & AV scanning perhaps? McAfee has tons of deals with ISPs so this would be a big foot in the door for Intel to push not only IP gateways but other types of set tops too. $7.7B is a big price tag but if my theory is correct you need to look at it in perspective of how many CPE devices are sold per year -- cable modems, routers, set tops. Presently they're all using ARM, PPC or MIPS chips. That's a huge potential growth area for low power x86. Wouldn't surprise me to see Intel pickup Motorola's set top business in the near future.


If Intel bought this in CASH, that would be silly, most likely they took our a low interest rate loan and used the cash to back it.

The fact that deals like this are happening means that the gloves are off and companies are not bunkering in anymore for a nuclear winter.

Also since this is just into 3rd qtr, this means that the company is not worried about 4qtr reports, this is clearly a sign of getting a head start on growth. I wonder how long the integration will take, 3 months would put in in 4qtr with something for Christmas?

What other software could Intel be looking at?


It's always interesting to see the business press scratch its head after baffling acquisitions like this and try to spin a coherent explanation of how the two companies fit together. The same thing happened when eBay bought Skype, but wishing didn't make that deal logical either.


i think i speak on behalf of many here: WHAT... THE... FUK?!?

that's like trojan buying a porno studio, sure they're in a related field but where the heck is the synergy?


I found this article[1] provides an interesting explanation: Intel is trying to integrate anti-virus software into mobile devices chips so that they can catch the mobilization wave. Feels quite similar to Intel's acquisition of many other vertical chip makers[2].

Now, how this is valued is something I still don't understand. Will this be another EBay-skype type of acquisition that'll end up break up again?

[1]: http://uk.finance.yahoo.com/news/intel-looks-to-secure-mcafe...

[2]: http://www.google.com/search?hl=en&tbs=cdr%3A1%2Ccd_min%...


Intel's fortunes are closely tied with Windows. With the rise of the ARM devices, decline of Windows, AND having other x86 manufacturers closing in, Intel has to pivot.

Security is a nice subscription business to be in. The nature of security business is essentially a fight between the providers and the malware publishers. As the computing platform fragments again, you need to be a large company to comprehensively support multiple kinds of devices.

As we start to see more netbooks, slates, smartphones deployed across the enterprise, each device presents Intel another opportunity to make money on a chip it didn't have to manufacture.


Could you please tell me if technically you can have security hardware based? Apple now competes with Intel, even in hardware. Would it make sense for Intel to have a "more secure" processors?


there's already a lot of hardware-based "security" out there. for example:

* http://en.wikipedia.org/wiki/Trusted_Platform_Module

* http://www.intel.com/technology/anti-theft/

* http://en.wikipedia.org/wiki/NX_bit

and so on, of which Intel is currently involved with lots.

Security is what a desktop processor spends a lot of it's time doing: making sure programs are isolated from one another and the kernel whilst still executing code.


vPro as well, which I strongly suspect is what this is about.

Intel want to put AV underneath the operating system (ie. under Windows), using their virtualization technology to make it invisible to the OS. This was one of the ideas behind their "failed" vPro project[1].

http://en.wikipedia.org/wiki/Intel_vPro#Security_and_Intel_v...

[1] Yes, I know vPro didn't "fail", but parts of it did, including an earlier attempt to shovel AV under the OS.


What we need is operating systems that are escalation attack proof, not hardware based anti-virus.

I was hoping something like this would break through:

http://en.wikipedia.org/wiki/Capability-based_security

Not that I've bought any anti-virus stuff since we stopped using Microsoft. In fact, the anti-virus stuff was a good part of the decision to quit using microsoft completely. It turned perfectly good computers in to space heaters.


I don't think we'll see any change to AV on the desktop. That's not a fast-growing market. Enterprise-grade security "in the network" on the other hand is a multibillion dollar market, and growing fast. Signature-based detection is still the premier way of blocking threats like email spam and malware. In order to scale to the higher bandwidths that today's networks run at, it's necessary to use purpose-built hardware for network and regex processing.


Heard via NPR this morning: Intel stocks are down a few %, while McAfee is up over 50%.

Seems investors think this is better for McAfee than Intel, too.


Intel offered 60% more than McAfee was worth yesterday. Basically if you buy MFE now (up 57% as I write), you're essentially just buying a bond with a 3% return between now and when the stock switches to Intel. Of course, there's always a chance the deal isn't completed for whatever reason.

As for Intel going down, I would sell too. I don't really see how this deal makes sense.


The purchaser's stock typically goes down because the company just spent a lot of money... whether loaned or not.


Very true. My point was that this just seems like a bad idea to me, and it would scare me from holding the stock if management keeps making deals like this.


Pretty typical for an acquisition -- the stock price of the company to be acquired will rise quickly to the price per share the buyer offers.


Maybe Intel needs more office space in Santa Clara? ;) What does it make a price per sq. foot for McAfee office space?

Also by acquiring a company with $2B revenues (and only $173M net profit) - they can do a lot of "creative accounting". The kind of large corporations usually do at the expense of shareholders and taxpayers...


Off-course buying $MFE is better investment for $INTC, than Itanium or Larabee, but for this kind of money they better buying $NVDA or $ARMH

http://twitter.com/nivertech/status/21696999486


Does anyone know if this has to go through shareholder approval? Maybe there is a chance we can defeat this. I'm a shareholder and I'm considering dumping the stock. I haven't seen anything this bad since the AOL/TimeWarner debacle.


Meanwhile, Plagued by Lawsuits, McAfee Founder Hunts for Cures in Belize http://www.fastcompany.com/magazine/145/fantasy-island.html


Good news for AMD and ARM that Intel is getting diluted with irrelevant stuff!


talk about being overpriced... i guess the bankers knew how to negotiate


"advised by Goldman Sachs"

Who wants to bet Goldman took a large, long McAfee position in the last couple of days? From an unrelated portion of the company, performing usual hedging activities, naturally :-)


You might want to brush up on the Glass-Steagall Act, which expressly prohibits these types of activities within organizations. i.e. ... "The Wall"

And with Goldman under the regulatory microscope right now, I bet they are on the straight and narrow.


The glass-steagall act which was repealed in the late 90s and which many people point to as the key piece of deregulation that kicked off the housing bubble?


Yeah, they are definitely on the straight and narrow, I will tell you that much. And that is the reason we know that our regulatory system is beyond broken. Goldman probably put up the loan for the deal and maneuvered it all into place, because naturally their advisory services are in synergy with their other products.


cynicism these days seems to not be recognized.


Dave DeWalt, McAfee's CEO is an excellent salesman.


he used to run documentum, which got sold to emc.


Intel exec Renee James discusses goals for McAfee (Q&A) - http://news.cnet.com/8301-13924_3-20014160-64.html


Can anyone tell me why? It seems like a poor fit.


I agree. I can see them moving to secure computers at the hardware level but does Mcafee even do this at the moment?


AV eats CPU cycles, Intel sells CPU cycles. That do ?


Lots of stuff eats CPU cycles, Intel surely cannot acquire all of it.


How many other products make everything else on the computer substantially slower?


Windows?


Disk encryption.


So Intel/AMD should acquire Adobe then? :)


They could just write crappy drivers and be done with it on that basis. Plenty of folk out there, cheap, who can write crappy drivers.


Maybe we can get hardware-level virus checking instructions so that scans don't take so freakin' long.


Good lord, please no! We need to make viruses so slow and painful that every OS designer must make their OS resilient to them. This is a stupid problem to have at all, the last thing we want is to bake in into the bloody hardware!


I'd have taken a dividend check...


Maybe Intel hopes to extend their 'Intel Inside' campaign to include anti-virus protection?


Didn't they stop that campaign years ago?


First thought: overpriced


The Onion had this strangely prophetic article about 10 years ago:

Just Six Corporations Remain

http://www.theonion.com/articles/just-six-corporations-remai...


Intel + McAfee doesn't seem like a good fit. Also, McAfee's cash cow has been the Windows installs it effectively patches with extra "security". Seems like that market does not have a rosy future, compared to alternatives like Mac and Linux. So weird time to make a bet on the future of Windows security add-on demand.

Struck me a bit like when Ebay bought Skype. I had to really strain my brain to come up with a way that deal made sense.


Seems like a management misunderstanding, or they really believe in a long life of MS. Even their own MeeGo (which is just a bunch or rpms) doesn't require any proprietary security solution, leave alone Android.

Of course, they could create and start to push some artificial, unnecessary security framework, but to whom? Some mobile Windows 7 on Atom I guess.. ^_^ which obviously a born-dead platform, same as this MeeGo.


Came over to HN for answers to this WTF. But even here we have none.

AV is snake oil. What do Intel have in mind?


Why is this voted down? It's true, no-one here has a coherent, rational understanding of why Intel has made this move. Everyone is asking why and no-one can comprehend the move. Nothing wrong in that. Either Intel has a crafty powerplay or they are off plan.

Surely the issue isn't calling AV snake oil. Really. In this audience?




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