Intel To Buy Security Firm McAfee For $7.68B

The Wall Street Journal

Intel Corp. agreed to buy computer-security software firm McAfee Inc. for $7.68 billion, as the chip maker moves increasingly into the software sector to support its expansion outside of the PC market.

The Silicon Valley giant will pay $48 for each share of McAfee, a 60% premium to Wednesday's closing price. The stock last traded at that level in 1999.

The acquisition is the latest in a string of deals aimed at consolidating formerly disparate parts of the technology sector. Tech giants dominant in particular areas of the industry are using acquisitions to grab footholds in faster-growing markets. Hewlett-Packard Co.'s  recent purchase of Palm Inc. was aimed at moving the world's largest PC maker into the smartphone sector. Meanwhile, Oracle Corp.  purchased Sun Microsystems last year to expand from selling software into providing a complete hardware and software package for corporate IT departments.

Intel's acquisition of McAfee, the company's largest-ever purchase, seeks to help the company expand into two new markets: smartphones, and the myriad electronic devices such as billboards, automated teller machines and others known as "embedded systems," that are increasingly connecting to the Internet, providing more personalized and interactive features.

Shares of McAfee were recently up 58% to $47.18--they were down 28% the past year through Wednesday--while Intel declined 2.5% to $19.10.

"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," said Intel President and Chief Executive Paul Otellini. "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."

McAfee, best known for its widely popular anti-virus software, has marshalled more resources to go after the quickly developing mobile market. It recently announced the purchase of mobile-device security company tenCube, a move that follows its purchase of Trust Digital, another mobile-security-software firm.

Intel, for its part, has been targeting the smartphone space with its Atom chip, which is widely popular in netbooks, but has yet to make waves in a cell phone market dominated by less power-hungry chips built by Qualcomm Inc. and others off of a design from ARM Holdings PLC.

The company has been targeting software firms to bring it into these new markets for some time. Last year Intel purchased software-maker Wind River Systems Inc. for $884 million to help move its Atom chip into embedded devices such as electronic billboards or automatic teller machines. By providing software, Intel makes it easier for customers to adopt its chips instead of those made by rivals.

Intel Chief Financial Officer Stacy Smith said in April that his company would be looking at software acquisitions to help it make more customized server and mobile seo products.

"In everything we do, software becomes more important," Smith told Dow Jones Newswires.

Intel expects the deal to "slightly" cut into earnings the first year after closing because of merger-related charges, and have little impact on the bottom line in the second year. A slight increase after those charges are seen in the first year.

The deal is Intel's second this week. Monday, Intel said it would buy Texas Instruments Inc.'s cable-modem product line for an undisclosed amount.

The acquisitions come as Intel last month reported its best-ever quarterly results in an ongoing rebound in the semiconductor market. For its part, McAfee's second-quarter earnings rose 38%, allaying concerns about its business after a weak first quarter. The company said sales grew sharply in North America, one of its key markets.

"The deal makes a lot of sense strategically over the long-term," said Patrick Wang, a chip analyst at Wedbush Morgan. He said that by integrating McAfee's security products, it's possible that Intel devices will soon be able to conduct real-time scanning for viruses and spyware, speeding up the process of protecting PCs and smartphones.

"From a technology standpoint, I really like it," said Wang.

McAfee to Acquire Trust Digital to Further Mobile Security

Bloomberg / Business Week

 

McAfee Tuesday said it's signed an agreement to acquire privately held Trust Digital as part of its strategy to expand into the mobile security arena, the enterprise sector in particular. The acquisition price for Trust Digital was not disclosed.

Tech M&A deals of 2010"The acquisition of Trust Digital's industry-leading enterprise mobility management solutions will extend the current McAfee security portfolio beyond the traditional endpoint, addressing the rapidly expanding mobile security market," said Dave DeWalt, president and CEO of McAfee. "Once completed, Trust Digital's industry leading enterprise mobility management solutions combined with leading McAfee antvirus, antispyware, host intrusion prevention, policy auditing and firewall technologies, will enable McAfee to address the mobile workforce by mitigating the risks associated with vulnerable or malicious mobile applications downloaded by employees."

DeWalt spoke about the planned acquisition during McAfee's Analyst Day in New York Tuesday.

Trust Digital focuses on a range of mobile operating systems, including iPhone OS, Android, Web OS, Windows Mobile and Symbian. "Together, we will enable IT to say 'yes' to the iPhone and Android," said Mark Shull, CEO of Trust Digital, on the combination of McAfee and Trust Digital. Trust Digital, said to have a few dozen customers, has just over 30 employees expected to join McAfee.

Brian Foster, senior vice president of product management at McAfee, said the strategy is to expand into enterprise management of mobile smartphones, for instance, integrating Trust Digital's encryption and management capabilities for Android with McAfee content protection and other security. Plans are also to bring Trust Digital's products under McAfee's common management console, ePolicy Orchestrator.

"It makes sense for McAfee -- or any of the large players -- so they can stay ahead of the demand," said Gartner analyst John Giraud. "The issue is protecting information on smartphones as they get more powerful, the iPhone and Android in particular. This is a fresh topic for a lot of people."

Girard said Trust Digital is small enough to be affordable for McAfee, which is making a good move in this acquisition.The acquisition is expected to be completed by June 30th.

McAfee Antivirus Goes Berserk, Freezes PCs

NEW YORK (AP) - Computers in companies, hospitals and schools around the world got stuck repeatedly rebooting themselves Wednesday after an antivirus program identified a normal Windows file as a virus.

McAfee Inc. confirmed that a software update it posted at 9 a.m. Eastern time caused its antivirus program for corporate customers to misidentify a harmless file. It has posted a replacement update for download.

McAfee could not say how many computers were affected, but judging by online postings, the number was at least in the thousands and possibly in the hundreds of thousands.

McAfee said it did not appear that consumer versions of its software caused similar problems. It is investigating how the error happened "and will take measures" to prevent it from recurring, the company said in a statement.

The computer problem forced about a third of the hospitals in Rhode Island to postpone elective surgeries and stop treating patients without traumas in emergency rooms, said Nancy Jean, a spokeswoman for the Lifespan system of hospitals. The system includes Rhode Island Hospital, the state's largest, and Newport Hospital. Jean said patients who required treatment for gunshot wounds, car accidents, blunt trauma and other potentially fatal injuries were still being admitted to the emergency rooms.

In Kentucky, state police were told to shut down the computers in their patrol cars as technicians tried to fix the problem. The National Science Foundation headquarters in Arlington, Va., also lost computer access.

Intel Corp. appeared to be among the victims, according to employee posts on Twitter. Intel did not immediately return calls for comment.

Peter Juvinall, systems administrator at Illinois State University in Normal, said that when the first computer started rebooting it quickly became evident that it was a major problem, affecting dozens of computers at the College of Business alone.

"I originally thought it was a virus," he said. When the tech support people concluded McAfee's update was to blame, they stopped further downloads of the faulty software update and started shuttling from computer to computer to get the machines working again.

In many offices, personal attention to each PC from a technician appeared to be the only way to fix the problem because the computers weren't receptive to remote software updates when stuck in the reboot cycle. That slowed the recovery.

It's not uncommon for antivirus programs to misidentify legitimate files as viruses. Last month, antivirus software from Bitdefender locked up PCs running several different versions of Windows.

However, the scale of this outage was unusual, said Mike Rothman, president of computer security firm Securosis.

"It looks to be a train wreck," Rothman said.