Home > Uncategorized > Intel to buy Mcafee for $7.68 billions

Intel to buy Mcafee for $7.68 billions

Michael J. de la Merced contributed reporting from New York.

Source http://www.nytimes.com

SAN FRANCISCO — Intel, the chip maker, has turned into Intel, the security specialist. Intel’s move to buy McAfee is its biggest effort to date to expand beyond its core chip-making business. Making one of most eye-catching moves in its 42-year history, Intel announced Thursday that it planned to acquire McAfee for $7.68 billion in cash.

Under the terms of the deal, Intel will pay $48 a share in cash, a 60 percent premium over McAfee’s Wednesday closing stock price of $29.93. The deal makes Intel a major player in the security software and services market. As such, Intel will shed some of its identity as a component supplier and climb higher up the technology food chain. Intel expects the market for security technology to grow as electronic gadgets and things like cars and home appliances increase their computing power and tap into the Internet.

Analysts expect that many of the tools that McAfee provides today may be built-in to chips and devices over time. “Eventually the software features will get embedded in the hardware,” said Ashok Kumar, a technology analyst with Rodman & Renshaw. “So, maybe this is an expensive way for Intel to acquire domain expertise.” Intel’s chief executive, Paul S. Otellini, said in a statement: “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.

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.” Intel, the world’s largest chip maker, has recovered from the recession well, posting record sales in recent quarters. Its results have been aided by rising sales of PCs to both consumers and businesses, and the expanded use of servers and data centers. After its most recent quarter, Intel had about $12.2 billion in cash and short-term investments on hand. Still, the company’s efforts to put new flavors of lower-power chips into smartphones, TVs, cars and other devices have been slow. As a result, investors have been reluctant to view Intel as a growth bet and continue to see the company as tied to the PC. The company’s share price has fallen about 20 percent in the last five years, closing on Wednesday at $19.59 a share. Intel, however, has been bulking up its software arsenal. Last year, it bought Wind River for $884 million, giving it a software maker with a presence in the consumer electronics and wireless markets.

With McAfee, Intel will take hold of a company that sells antivirus software to consumers and businesses and a suite of more sophisticated security products and services aimed at corporations. In addition, it gives the Silicon Valley veteran a potentially steadier revenue stream than it has found through the often booming and busting computer chip market, since much of the security software is sold on a subscription basis.

McAfee’s revenue rose 20 percent last year to $1.93 billion. Intel’s revenue fell 7 percent to $35.1 billion. At 80 percent, McAfee’s gross margins surpass Intel’s, which tend to be around 65 percent. Intel builds a variety of security functions directly into its chips and has offered its customers ways to tap into the tools. McAfee’s technology goes well beyond what Intel currently offers. The companies are both based in Santa Clara, Calif., with head offices about a mile from each other.

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