Intel to Buy McAfee for $7.68 Billion

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Intel said Thursday it plans to acquire security vendor McAfee in a cash deal valued at about $7.68 billion and aimed at enhancing the chip maker's mobile strategy.

Both boards of directors have approved the deal, and McAfee is expected to become a subsidiary within Intel's Software and Services Group. McAfee develops a variety of security software for end-users and enterprises, including antivirus applications, firewalls and intrusion protection systems. Intel said that the current approach to security does not address the full range of Internet-connected devices, including TVs, cars, medical devices and ATM machines. "Hardware-enhanced security" will be needed to counter increasingly sophisticated threats, said Renée James, Intel senior vice president, and general manager of the group.

McAfee CEO Dave DeWalt wrote in a blog post that "current cybersecurity model isn't extensible across the proliferating spectrum of devices."

"The industry needed a paradigm shift, incremental improvements can't bridge the opportunity gap," DeWalt wrote. "There is no better partner that we could have found than Intel."

The deal is expected to close after McAfee shareholder approval and regulatory clearances. Intel said the acquisition will have on a GAAP basis a slightly dilutive effect on its earnings in the first year of operations and a flat effect in the second year.

McAfee generated approximately $2 billion in revenue in 2009, and has about 6,100 employees. The company has had double-digit growth over the last year and was an attractive acquisition target, and rumors had been circulating for some time, said Ruggero Contu, senior research analyst at Gartner.

But an acquisition by Intel is surprising, Contu said. "I would have thought that in terms of synergies, I would have thought other players would have" been better positioned to integrate McAfee into their operations, he said.

Intel would be wise to continue McAfee's successful consumer security software business, as it has been bringing in increased revenue, Contu said. In terms of the overall security market, the acquisition is likely to have an impact on Symantec, as it is McAfee's most direct competitor, Contu said.

"We'll see how it shakes out," Contu said.

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