While Intel is digesting security company McAfee, speculation is running rampant on how security will play into Intel's product strategy down the road. No doubt, the marriage of security and the chip holds the potential to significantly and fundamentally change the IT industry. In light of the seemingly unstoppable trend of consolidation in the industry, AMD could be a logical candidate to make the next big security purchase.
To keep its 11 percent market share, and keep itself from falling further behind, AMD will need to find a way to bolster its value and remain competitive. And making a security acquisition of its own might be just the antidote to reinvigorate its innovation strategy and give Intel a run for its money.
Here is why we’re putting our bets on Trend Micro.
Almost no one, with the possible exception of the brass at Intel, knows how the acquisition of McAfee fits in with the chip maker's long-term product strategy or how the merger will impact the IT landscape two, five, or 10 years from now. But there's a good chance that the addition of security into the chip set, if indeed Intel plans to follow through on a widely speculated integration strategy, will give the giant chip manufacturer a competitive leg up over all other players.
Experts said that the implications for embedding security onto the chip set are almost limitless, giving manufacturers the ability to put secure chips into just about anything, including cars, medical devices, mobile phones and critical infrastructure.
Integrated chip security could be bad news for AMD. In order to remain a competitive player in the game, AMD might have to come up with a viable plan to also embed security as the market continually moves away from the PC and increasingly gravitates toward a plethora of disparate mobile offerings.
Otherwise, Intel will almost definitely be the clear champion in the mobile phone and tablet space, not to mention an array of hardware in need of security enhancement.
AMD beat out Wall Street expectations lfor the third quarter, reporting increased revenue, which rose to $1.6 billion over $1.4 billion last year. Nonetheless, analysts and shareholders alike have their concerns, not the least of which is the company's significant technological lag behind Intel, particularly in the tablet space.
AMD has remained a distant second behind Intel in the chip space, holding around 11 percent market share. Recently, analysts have contended that AMD's heavy reliance on the PC space could work against it as the PC market continues to decline, propelled, in part, by the rocket-like popularity of the Apple iPad.
Fallout from the sinking PC business could also be compounded with AMD's lack of focus in the tablet space, allowing it to be surpassed by Research In Motion and HP, both of which are planning their own tablet releases. Meanwhile AMD doesn't seem all too eager to jump on the tablet bandwagon any time soon.
Additionally, the No. 2 microprocessor vendor has lost market share in the server space, and anticipates a relatively flat fourth quarter, leaving a gaping hole for a more virulent competitors to grab market share.
Once solidly positioned as the No. 3 security company, Trend Micro has in recent years experienced stagnant marketshare, hovering between 6 and 7 percent, and has struggled to keep pace among the sea of more innovative and nimble players such as Kaspersky Lab and Sophos.
In addition, Trend Micro's list of woes includes tumbling sales revenues, which sank from $261 million during its first quarter this year to $255 million by the end of its second quarter. The company also posted a net income loss for its second quarter ending in June 2010, that decreased 20 percent from the same period last year, following a 27 percent year-over-year income decrease at the end of its first quarter ending in March. Among other things, the company has pointed to adverse economic trends on principal markets, a lack of attractive investment targets and difficulties in successfully executing its investment strategy, as reasons for its downfall. These days, it seems almost impossible for companies with consistently falling revenues to remain viable as standalone entities.
Consequently, in light of an uncertain economic future, a buyout might be the best move to get the company back on its feet.
AMD could do worse. Despite Trend Micro's economic woes, the company does have a comprehensive and well-established portfolio of security products, recognized by everyone in the industry.
Trend Micro's line of consumer and enterprise endpoint security products, DLP and Web security can easily go toe to toe with McAfee's, while the Tokyo-based company has a strong competitive edge over McAfee with its comprehensive line of encryption and network security software products.
Unlike McAfee, Trend Micro plays well in a wide range of market segments, touting particularly strong inroads in the SMB and midmarket spaces. Plus its presence in the enterprise gives the company a leg up over players such as Kaspersky Lab, which has primarily seen the bulk of its success in the smaller markets.
Add name recognition to the mix and AMD might have itself viable security contender.
Trend Micro carved out its own niche in the cloud space before"cloud security" was regularly juxtaposed in the same sentence.
Unlike the bulk of its competitors, Trend Micro led the cloud security space with the inception of its hosted endpoint Deep Security lines, as well as its SMB-focused Worry-Free products and hosted e-mail security service.
Last year, the company delved into the virtual space with server virtualization and a spate of virtual appliances for products such as encryption, endpoint, messaging and Web security. And recently, Trend Micro took its cloud presence a step further by implementing its SecureCloud product, designed to protect and encrypt data in both public and private cloud environments.
In light of its strong presence in the cloud, Trend Micro is an attractive offering for an array of channel-focused service providers, adding a dimension to the company that could complement just about any IT strategy.