Intel, McAfee deal shows increased security in digital age

By Wendy Qi
0 CommentsPrint E-mail Xinhua, August 29, 2010
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In general, software tends to operate at a much higher margin than hardware, which is also reflected in comparing Intel's roughly 55 percent gross margin with McAfee's nearly 75 percent.

Intel management indicated that McAfee will operate as a wholly owned subsidiary, with DeWalt remaining at the helm to continue growing the security vendor's business.

In a press conference following the deal announcement, Intel CEO Paul Otellini stressed how the move was aligned with the company's focus on security.

"We believe that security will be most effective when enabled in hardware. Joining the assets of McAfee with Intel will accelerate and enhance the combination of hardware and software solutions, improving overall security for our platforms," Otellini told investors on the call.

Although Intel paid a premium of roughly 60 percent over McAfee's closing price the day before the deal was announced, investors' reactions have been mixed.

Within hours of the announcement, a McAfee shareholder filed suit against the company on allegations that the final deal price did not accurately reflect the full worth of the software security firm. These allegations are based in part by analyst expectations where at least one analyst valued the company's target price at 50 dollars a share, two dollars more than the purchase price of 48 dollars a share.

According to a public statement released by the Shareholders Foundations, an investor advocacy group, a law firm behind the lawsuit questioned whether "the McAfee Board of Directors breach their fiduciary duties by not seeking a deal that provide better value for McAfee Inc.."

"Those lawsuits are just ambulance chasing lawyers looking for a payoff," Daly told Xinhua.

"I've seen 10 of those this year ... of course you can always say it's worth more but based on what? From McAfee's perspective they see it as doing it right by shareholders. They did that very well."

While the deal represents the largest transaction of its kind in security, it is part of a string of transactions signaling an increased shift in focus on security in the IT sector. Earlier this month, Hewlett-Packard Co. (HP) acquired Fortify Software, a privately held security applications software developer.

While the exact terms for the acquisition were not released, some analysts including The 451 Group placed the final sales figure at roughly 250 million dollars.

Technology industry analyst groups like The 451 Group see this as a welcoming trend. In a report issued following HP's purchase, analysts wrote that "we believe security needs to be baked into common infrastructure wherever and whenever possible."

One of the key challenges, however, would be for IT giants like HP, with diverse product and service lines, to adequately integrate these features with their existing offerings.

"Since security is not core to (HP), there is the risk that these innovative technologies could get lost or wither on the vine," wrote The 451 Group.

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