Intel to Buy McAfee for $7.68 Billion

IntelIntel (INTC) is snapping up security giant McAfee (MFE) in a $7.68 billion deal, as the chip king now views security at nearly the same level as its strategic focus on Internet connectivity and developing more energy-efficient chips.

Under the deal, Intel will pay McAfee shareholders $48 a share in cash, a 60% premium over the stock's closing price on Wednesday.

"Everywhere we sell a microprocessor, there's an opportunity for a security software sale to go along with it," said Intel CEO Paul Otellini in a conference call with analysts. "And it's not just the opportunity to co-sell, but it's an opportunity to deeply integrate these into the architecture of our products."

When the firms merge, McAfee will become a wholly owned subsidiary of Intel's software and services group, which already has an 18-month relationship with the security giant. In fact, Intel expects to introduce a product in the early part of next year that was born out of that partnership.

"In working with them," said Otellini, "the notion of moving beyond just partnering became very, very clear. I think that the products we're coming out with in 2011 are really exciting, and they add a measure of security and goodness to the platforms we offer today."

Taking Wall Street by Surprise

Two issues led to the decision to buy McAfee, rather than continue to partner, Otellini said.

"The deeply integrated combination of hardware and software capabilities would add substantial value to our platforms and differentiation to our platforms. That was No. 1. No. 2, it became pretty clear to us that the value of that offering was fairly significant. So, it made sense from a financial perspective to have that value accrued into Intel shareholders."

Despite the previous ties with McAfee, Intel's announcement took Wall Street by surprise. Just last April, HP (HPQ) was said to be interested in McAfee. And a couple years back, Cisco (CSCO) was rumored to be eyeing McAfee as an addition to its security offerings.

However, the notion of a large hardware company hooking up with a major security player is nothing new. Consider Symantec's (SYMC) bold acquisition in 2005, when the security software giant acquired storage maker Veritas for $10.5 billion. And as far back as 2003, Cisco made its foray into security software with the acquisition of network security software maker Okena.

The Soothsayers Were Right


The Symantec-Veritas acquisition, however, made some investment bankers question whether a stand-alone security industry could survive or if it would eventually morph into other industries. With Symantec and McAfee, the two largest security software vendors, aligning with industries outside of security, it now appears the soothsayers from five years ago were right.

Intel expects the deal to close as early as the end of the year, after McAfee shareholder approval and other regulatory clearances. The transaction, excluding one-time write-downs and deferred revenue, is expected to slightly add to Intel's current earnings forecast during the first year and improve beyond that.

In early trading, McAfee shares spiked nearly 60%, while Intel moved about 3% lower.

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13 Comments

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mac2jr

The best way to sell security software is to build a virus into the chip that is running the computer.

August 20 2010 at 12:22 AM Report abuse +1 rate up rate down Reply
Denise

Maybe Intel can make it work right, and stop crashing computers.

August 19 2010 at 7:11 PM Report abuse +2 rate up rate down Reply
eaglesfan6928

avast antivirus (free edition) is the best.

August 19 2010 at 6:36 PM Report abuse +3 rate up rate down Reply
jbjg24m

i currently have Mcafee on both my desktop and laptop, never had any problems at all with it . works good for me !

August 19 2010 at 5:07 PM Report abuse rate up rate down Reply
jcrvac

WELL I OWN 10000 SHS OF INTEL I LOST 6900 DOLLARS WILL I GET IT BACK IN SHORT TERM?

August 19 2010 at 4:09 PM Report abuse rate up rate down Reply
wabille

Why use or waste your money on McAfee, When you can get the Anti-virus now for FREE. Google "AVG.com". Google also "DAT5958" you might have been affected by it also.

August 19 2010 at 2:32 PM Report abuse rate up rate down Reply
goodgrief61945

Does this mean that McAfee will no longer be available for paying members of AOL???

August 19 2010 at 1:28 PM Report abuse +2 rate up rate down Reply
1 reply to goodgrief61945's comment
Robert Cape

Gotta flash for you, son. Whether you get it from AOL, or pay for it in a store, McAfee is no bargain in either source. It doesn't install in operating systems as it should, and McAfee's "technicians" in India can't help much. The main thing McAfee installation software does is to make sure you don't have any other malware or spyware, or competition on your computer. And, the updates are wonderful at corrupting and crashing your "box".. they are a perfedt partner for Intel. Whoa to AMD's processors, I bet...

August 19 2010 at 3:35 PM Report abuse +2 rate up rate down Reply
Gg

Oops, forgot $ sign.

August 19 2010 at 1:09 PM Report abuse rate up rate down Reply
Gg

Actual cost 7,684,827,867.12

August 19 2010 at 1:08 PM Report abuse rate up rate down Reply
gardeningatnite

Monopoly, monopoly and more monopoly! And you wonder where the $$$ is going away from the common man!

August 19 2010 at 9:51 AM Report abuse +1 rate up rate down Reply