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Confused about Intel Buying McAfee? – Quick Analysis

Twitter / johnarleyburns: @cote Intel/McAfee - it's ...

Really, it’s sort of baffling that Intel would buy McAfee. Sure, you can put together a good story on wanting to buy into software, needing to do something with that big pile of cash, and even the idea that this gives Intel “security” that they can either put in their chips or “in the cloud.”

As far as I know, McAfee is a solid company, so there’s nothing wrong with the assets being purchased. Of course, CPU-bound nerds hate it, but they’re hardly the target market.

Context: Market Pressures?

In the wider-context, there’s a certain threat to x86 hegemony – more mobile devices means a move from the desktop where Intel has it easier, Oracle is having a go at high-end server sales (using SPARC chips), IBM revamped its POWER line, and folks like Cisco would like to reduce purchasing to one box where you can’t pick (nor “should” you care to pick) what type of chip is inside.

Conceivably, the same would apply to “cloud,” if that’s going to take off in the public, off-premise sense: when you choose a cloud service, you don’t choose the chip inside, you’re choosing purely based on service-levels (performance, uptime, etc.) and software.

Intel has staved off being commoditized numerous times, mostly with marketing and partnering deals. Those bunny-suit guys some how made consumers care about having Intel inside. I bet you’re humming their medley now. That’s powerful, enviable brand-marketing. In contrast, you probably don’t care about the type of tire on your care, let alone the who makes the parts in the engine.

You can’t grab software with tweezers

Intel is very narrowly defined in my mind as a chip company – a very successful chip company, doing whatever it takes, apparently, to move product. Jumping into the software business through acquisition, thus, seems odd. As Jon Collins pointed out, Intel once had LANDesk (from 1991 to 2002). LANDesk is something of a “quiet success” in the SMB IT Management space. I was worrying about dating girls and passing classes back then, so I have no first hand account of the logic, but I’d wager it had something to do with the “hotness” that was IT Management back then (the hay-day of Tivoli, PATROL, etc.) and Intel wanting to expand into it. And then they sold off LANDesk.

Partners & Ecosystem

There’s also partnering angles to worry about. Being a more pure chip company, Intel doesn’t have to worry about competing with partners, like, say, Microsoft (see “Wintel”), VMWare as well (taking advantage of virtualization built into chips, etc.).

Mobile

“Hardware-enhanced security will lead to breakthroughs in effectively countering the increasingly sophisticated threats of today and tomorrow,” said [Intel’s Software and Services Group Renée James, senior vice president, and general manager of the group]. “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.”

And as far as mobile: sure, everyone’s doing it. The idea of Intel being a one-stop shop for secure, mobile chip and hardware – with embedded/branded McAfee – aligns with the current dance craze in tech, everything from one vendor, “one-check to write” strategies. Intel is all into MeeGo, as well, which Nokia seems to be looking towards as anti-Apple bug-spray.

In this context, Intel’s mobile ambitions can also be extended to The Internet of Things, as Anshu Sharma pointed out in the Enterprise Irregulars list.

But, as Forrester’s Andrew Jaquith puts it: “[n]either Intel nor McAfee are serious players in the mobility market.” Again: we’ll see.

Cloud

Bob Warfield sums up the cloud angle:

rankly, McAfee should have been snarfed by someone with major Cloud ambitions.  The Cloud needs serious security, and there are synergies with the Cloud I won’t go into here.  Suffice it to say that some powerful potential exists when you own a good-sized Cloud and can take responsibility for defending its inhabitants from outside threats.  That will be a more and more serious value add over time.  Oh well, need to check how much Symantec is up on the expectation someone will want the remaining player.  IBM?

Indeed, there’s only one stronger brand name in security than McAfee, and that’s Symantec. The brand access, channel access, and the existing infrastructure of being a “security” company may be valuable – but does McAfee or Symantec really have anything for “securing the cloud”? I’m just now seeing those things emerge, and I’m not sure too sure what the yellow jackets and McAfee have in that area.

The Simplest Answer

This last point is perhaps the most practical angle, as many have suggested to me: Intel is just buying McAfee’s revenue streams and market to help shore up Intel’s traditional sales. With that big pile of cash on-hand, perhaps the old adage applies to Intel: you have to spend money to make money.

I’m usually pretty good at turning up the vision dial on these kinds of things, but I can’t get it past about 3 or 4 this time. We’ll see how it develops.

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Disclosure: IBM is a client, as is Microsoft. OpenHand was a client before being acquired by Intel.

Categories: Cloud, Quick Analysis.

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Continuing the Discussion

  1. [...] analyst Michael Cote suggests that it will be hard for hardware-centric Intel to buy its way into software, and it’s a fair [...]