Why did Intel buy McAfee for $7.7 billion?

Posted by Ahsan Tasneem | 11:35 PM | , | 0 comments »

Intel has just bought computer and software security company McAfee according to a release issued this morning. The all cash deal is worth $7.68 billion, or $48 per share.
McAfee is one of the largest security technology companies in the world and saw $2 billion in revenue in 2009. Cyber security, whether it be on computers or mobile devices, is a lucrative business as internet use is on the rise. And McAfee also offers smartphone security software, through the recent acquisitions of Trust Digital and TenCube. Clearly, Intel wants a piece of the pie.
According to MarketWatch, Intel will pay $48 a share in cash to buy the firm, amounting to a shade under $7.7 billion. this works out as a premium of 62% over McAfee’s closing price on Wednesday.
Question is, why?
That’s a good question. Perhaps Intel feel that there’s good money in buying into a security firm, or possibly the acquisition paves the way to embed security software directly onto processors. Or maybe Intel just had the cash to burn.
Intel is not shy of carrying out acquisitions so this move isn’t that much of a surprise. With Intel’s focus being primarily on CPUs and wireless, being able to incorporate security into these devices would give it a substantial upper hand over AMD (as if it needs one, Intel absolutely dominates AMD in all areas except graphics).
Intel’s president and CEO Paul Otellin called security the “third pillar of what people demand from all computing experiences,” behind energy-efficient performance and connectivity.
McAfee, which has enjoyed double-digit, year-over-year growth and nearly 80 percent gross margins last year, will become a wholly-owned subsidiary of Intel, reporting into Intel’s Software and Services Group. The group is managed by RenĂ©e James, Intel senior vice president, and general manager of the group.

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