Endpoint

9/9/2016
03:45 PM
Connect Directly
Twitter
LinkedIn
RSS
E-Mail
50%
50%

Intel Sheds McAfee Majority Stake Amid Failed 'Synergies'

Chipmaker's $7.7 billion investment in security firm did not deliver as expected, analysts say

Intel's decision this week to sell a majority stake in its McAfee subsidiary to asset firm TPG for $3.1 billion gives Intel a way cut losses on what many agree has been an underwhelming investment for the company.

Intel acquired McAfee for about $7.7 billion in August 2010. Company officials at the time had described the acquisition as bolstering Intel’s security capabilities in key areas like wireless mobility and the emerging market for the Internet of Things. The company had touted the investment as evidence that it had made security a strategic focus area along with energy-efficient computing and Internet connectivity.

Intel’s disclosure this week that it has agreed to sell 51% of its McAfee stake shows that the acquisition failed to live up to those expectations.

“The McAfee and Intel deal never really delivered on any synergies,” says Jon Oltsik, an analyst with Enterprise Strategy Group. In recent times, the McAfee unit has in fact been somewhat languishing in the market as Intel focused on another more immediate strategic concerns. “This move gives McAfee the ability to turn things around,” Oltsik says.

Under the agreement announced this week, Intel will get $3.1 billion and retain 49% of its stake in McAfee. TPG will make an equity investment of $1.1 billion and own 51% of the newly spun-off security firm.

Chris Young, senior vice president and general manager of the Intel Security Group, will become the new CEO of McAfee.

In announcing the deal, Intel CEO Brian Krzanich positioned McAfee as one of the largest pure-play security vendors in the market and predicted that it would thrive as an independent company with the backing of TPG and Intel.

Rumors about Intel planning to divest its security business have been circulating for several weeks now. Wall Street analysts had suggested that such a move would not be surprising considering that McAfee’s profit margins were much lower than that generated by Intel’s hardware business, and the uneasy fit between McAfee’s software technology and Intel’s core business.

“Spinning McAfee out as a separate entity is the right move for Intel,” says Richard Stiennon, a former security analyst and chief strategy officer of Blancco Technology Group. “It was a poorly contrived strategy -- if you can even call it that -- where they haphazardly combined anti-malware with silicon. It was doomed from the start and should never have happened in the first place,” Stiennon says.  

But as a standalone cybersecurity company, the new McAfee will have its work cut out trying to compete in a market that demands innovation and nimbleness, he notes.

Oltsik believe that an opportunity still exists for McAfee to leverage its technology expertise and establish itself as an enterprise-class vendor. But it may first need to acquire some technologies to fill in gaps in its product portfolio, he says.

“I don’t think this impacts McAfee enterprise customers,” Oltsik says. “If anything, it’s a positive step in that McAfee will be more attentive and focused. I’ve heard some stories about support problems over the past few years. Now McAfee can focus on its customers and fix these problems.”

Intel’s experience with McAfee could serve as a cautionary tale to companies making security acquisitions without thinking through whether it's a fit with their existing business, says Pete Lindstrom, an analyst with International Data Corporation. But the spinoff should cause little disruption for customers, he adds.

“McAfee is large enough and mature enough to run its business with little impact to its customers,” Lindstrom says.

Related stories:

 

Jai Vijayan is a seasoned technology reporter with over 20 years of experience in IT trade journalism. He was most recently a Senior Editor at Computerworld, where he covered information security and data privacy issues for the publication. Over the course of his 20-year ... View Full Bio

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
jries921
50%
50%
jries921,
User Rank: Ninja
9/15/2016 | 1:52:23 PM
49% is still a controlling interest
The headline made it look like Intel was unloading it.
Whoopty
50%
50%
Whoopty,
User Rank: Ninja
9/12/2016 | 7:19:24 AM
Who? What?
I must admit, much like Yahoo's recent sale, I'm somewhat surprised that McAfee even exists still. I've heard far more about its once upon a time founder and his shenanigans since the Intel buy than I have about the anti-virus firm itself. 



Do people think it will have a better life under its new owners?
Julian Assange Arrested in London
Dark Reading Staff 4/11/2019
8 'SOC-as-a-Service' Offerings
Steve Zurier, Freelance Writer,  4/12/2019
Register for Dark Reading Newsletters
White Papers
Video
Cartoon
Current Issue
5 Emerging Cyber Threats to Watch for in 2019
Online attackers are constantly developing new, innovative ways to break into the enterprise. This Dark Reading Tech Digest gives an in-depth look at five emerging attack trends and exploits your security team should look out for, along with helpful recommendations on how you can prevent your organization from falling victim.
Flash Poll
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
CVE-2019-1840
PUBLISHED: 2019-04-18
A vulnerability in the DHCPv6 input packet processor of Cisco Prime Network Registrar could allow an unauthenticated, remote attacker to restart the server and cause a denial of service (DoS) condition on the affected system. The vulnerability is due to incomplete user-supplied input validation when...
CVE-2019-1841
PUBLISHED: 2019-04-18
A vulnerability in the Software Image Management feature of Cisco DNA Center could allow an authenticated, remote attacker to access to internal services without additional authentication. The vulnerability is due to insufficient validation of user-supplied input. An attacker could exploit this vuln...
CVE-2019-1826
PUBLISHED: 2019-04-18
A vulnerability in the quality of service (QoS) feature of Cisco Aironet Series Access Points (APs) could allow an authenticated, adjacent attacker to cause a denial of service (DoS) condition on an affected device. The vulnerability is due to improper input validation on QoS fields within Wi-Fi fra...
CVE-2019-1829
PUBLISHED: 2019-04-18
A vulnerability in the CLI of Cisco Aironet Series Access Points (APs) could allow an authenticated, local attacker to gain access to the underlying Linux operating system (OS) without the proper authentication. The attacker would need valid administrator device credentials. The vulnerability is due...
CVE-2019-1830
PUBLISHED: 2019-04-18
A vulnerability in Locally Significant Certificate (LSC) management for the Cisco Wireless LAN Controller (WLC) could allow an authenticated, remote attacker to cause the device to unexpectedly restart, which causes a denial of service (DoS) condition. The attacker would need to have valid administr...