Intel moves beyond 'just the chip' with McAfee buy

Intel wants to break into device market with a bigger package deal, analysts say

After trying to push its way into the increasingly lucrative consumer electronics market for the last few years, Intel hopes that adding a security offering will be just what the market needs.

The world's biggest chip maker announced today that it's set to purchase security software maker McAfee for $7.68 billion. Intel said both boards of directors have approved the deal, and McAfee is expected to become a wholly owned subsidiary within Intel's Software and Services Group.

That means the chip maker is becoming a security company, as well. And with this move, Intel said it's looking to enhance its mobile strategy .

That's a smart move, say several industry analysts.

"This definitely could help Intel," said Jim McGregor, an analyst with In-Stat. "The PC industry already has had a real focus on security. Smartphones don't have that same focus. And think about it ... My smartphone probably has as many bookmarks and contacts as my computer does. Think about the threats to that, especially if I'm doing banking or whatever through my mobile phone."

Bill Kircos, an Intel spokesman, told Computerworld today that the company initially will sell chips and security software separately. However, in the coming months and years, there will be a gradual evolution, and Intel will begin to adjust its chips so they work better with McAfee security software. Eventually, Intel will build more security features directly onto the processor.

Kircos added that researchers at Intel and McAfee have been working together on a silicon-based project for the last several months. He declined to elaborate.

"Intel is obviously hoping this will help them finally break into the device market," McGregor said. "They've been trying to plow their way into that market for three years, but it's been tough. They just haven't had the right offering ... This move is to enhance that offering."

Shane Rau, an analyst with market research firm IDC, said Intel's acquisition of McAfee goes beyond selling more chips.

Of course, Intel wants device makers to buy more of its chips, but the company has a bigger plan in the works. According to Rau, Intel wants to provide more of the "stack" for mobile devices - the processor, security software and the operating system.

"Intel is looking to provide more of the complete package for devices," Rau said. "Remember that Intel bought Wind River , which is associated with an embedded operating system and design tools for mobile devices. Now think of McAfee as a potential application and service provider for embedded systems."

Like Apple , which went from selling the hardware to the software and even the silicon in its Macintosh computers, Intel wants to provide a more complete offering.

"Intel wants to sell more chips, of course. That's what Intel does best," Rau added. "But increasingly you cannot just sell a microprocessor. It's also making sure that Intel has the right solution that carries the chip into the design win. Just providing the chip alone is not enough anymore."

This move to a fuller offering will be another challenge for Intel's competitors.

Greg Richardson, an analyst with Technology Business Research, said the impact on competitors might not be immediate, but it is coming.

"The addition of McAfee to Intel's platform is a new differentiator for Intel, and anytime there is a new differentiator, a new hurdle is created for competitors," Richardson said. "At the onset, they won't feel that big hurdle. The real impact of the acquisition probably won't be felt until 2012, so AMD has some time to position itself."

Other analysts, however, were surprised by the move and said it may be a benefit to McAfee's' competitors, at least in the short term, while puzzling its enterprise customers.

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Sharon Gaudin

Computerworld (US)
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