Intel, McAfee Envision Integrated Security Beyond PCs

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Intel's agreement to purchase McAfee stems from a relationship that began 18 months ago between both companies looking to extend security solutions far beyond the PC world, according to executives.

Intel and McAfee had been collaborating to enhance and integrate security offerings into Intel's hardware and at a certain point, it just made more sense to bring McAfee in house to continue that fusion of security and processors, said Intel executives on a call with analysts Thursday.

Intel agreed to buy McAfee for $7.68 billion in cash, or $48 per share, on Thursday. McAfee was founded in 1987 and had about $2 billion in revenue in 2009.
"Having McAfee in the Intel family allows us deeper integration and the best capability it's possible to offer," said Paul Otellini, president and CEO at Intel, on the call with analysts.

Otellini also indicated that Intel may look to integrate McAfee into a wider variety of non-PC technology, including the company's Smart TV initiative. "We haven't gone through pricing models for Smart TV security yet, but given that it's software -- and increasingly necessary software -- and these [solutions] can have an annuity stream with it, it looks like a pretty positive deal relative to our low-end offerings," Otellini said.

Because Intel and McAfee have been workingly jointly, if separately, for 18 months, the first products to feature integrated technology between the two companies should come in early 2011, said Renee James, Intel senior vice president and general manager of Intel's Software and Services Group.

"We don't comment on future products, but we will see lots of opportunities to take advantage of security features in our core products today. I look forward to updating you in the first part of next year," she said. "Yes, the products did grew out of the relationship that is pre-established. [Buying McAfee] gives us the insight of additional enhanced solutions that we could create. The products we're contemplating are based on already existing technology for existing PC products."

Buying McAfee allows Intel to accelerate its plan to create "hardware-enhanced security," according to Intel.

"The way I think of it is we have enhanced and new opportunities to [integrate] that we can't do alone in software. It's an enhanced category of products only created by unique hardware innovation in combination with the software products we sell today," James said.

David DeWalt, CEO of McAfee, wrote in a blog post Thursday that the Intel deal emphasizes that security is becoming a more-important subject in an increasingly-connected world.

"The number of connected devices is expected to grow from 1 billion to 50 billion by 2020, according to industry estimates. This explosive growth of Internet and IP-enabled devices is reshaping communication, collaboration and commerce opportunities for individuals and organizations around the world," DeWalt wrote. "The current cybersecurity model isn't extensible across the proliferating spectrum of devices -- providing protection to a heterogeneous world of connected devices requires a fundamentally new approach to security. The industry needed a paradigm shift, incremental improvements can't bridge the opportunity gap."

The Intel-McAfee merger will help bring those solutions to market, DeWalt wrote. "We are joining forces to tackle this next generation cybersecurity issue, which impacts everyone and anything connecting to the Internet," he wrote. "Security will be a third pillar in Intel's strategy, next to power efficient performance and Internet connectivity. By bringing McAfee's security DNA to Intel, we can offer better solutions and products to the market. By next year, we will introduce new security offerings as a result of our collaboration."

Otellini doesn't think Intel and McAfee will "look at bundling per se" and noted that Intel intends to continue to work with other security vendors. "We're not a McAfee only strategy," Otellini said. He didn't say whether he thought other security vendors might not want to work with Intel now that McAfee is part of Intel.

While Intel will look to integrate more security into its hardware, it will continue to offer software-only security solutions by McAfee too, Otellini said. "That's a growing and robust market and great business that McAfee in today," he said.

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