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Intel Acquires McAfee for $7.68 Billion

August 19, 2010

Intel Corp. is purchasing computer-security software maker McAfee Inc. for $7.68 billion as part of Intel’s commitment to serve an increasing array of Internet-connected devices.

The deal will help the world’s number one chipmaker improve the security of its chips by sharpening the software that goes into them.  The acquisition will also stream new revenue for Intel, which will sell security software alongside new chips it is developing for mobile phones, televisions and cars.  

Intel said security is now a fundamental component of online computing, but the approach to security today is not adequate compared to the growing availability of Internet connections on mobile phones, medical devices, ATMs, automobiles and elsewhere.

The company said that the industry needs a new approach that combines software, hardware and services to meet tomorrow’s needs.

“With the rapid expansion of growth across a vast array of Internet-connected devices, more and more of the elements of our lives have moved online,” Intel CEO Paul Otellini told The Associated Press. “In the past, energy-efficient performance and connectivity have defined computing requirements. Looking forward, security will join those as a third pillar of what people demand from all computing experiences.”

Otellini said the McAfee acquisition came because of a close collaboration that has been going on for a year and a half, one that will result in unspecified products reaching the market next year.

UBS analyst Uche Orji said during a conference call with executives that he questioned Intel’s rationale for the deal, wondering if it would get something out of owning McAfee that it could not get through collaboration.

Otellini told Orji that owning McAfee meant Intel could plan for the longer term and combine the two companies’ technologies at a deeper level.

Intel has been persistent in trying to expand into the smartphone market and other Internet-connected wireless devices.  With the purchase of McAfee, Intel will be able to secure those devices from malicious software and other computing threats.

Intel said the deal will hurt earnings slightly in the first year the companies are combined.  The company predicts the deal will slightly boost earnings next year and improve after that.

Both boards of directors have unanimously approved the deal.  The deal still requires McAfee shareholder approval and regulatory clearances.

McAfee is one of the world’s largest security technology companies, and it reported about $2 billion in revenue last year.

Intel made a series of recent software acquisitions including companies that specialize in gaming, visual computing, embedded device and machine software.

The company reported its largest quarterly net income in a decade last month as the chipmaker benefited from a stronger computer market.

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