Why Intel bought McAfee

Nothing to do with security

Intel logoINTEL’S PURCHASE OF McAfee is quite synergistic and makes a lot of sense to anyone following the company. Contrary to most opinions out there however, it has nothing to do with security.

Intel’s current stronghold is corporate computers, desktop, laptop, and servers, not necessarily machines for the ‘best buy’ set. AMD may have 20% marketshare or so, but for the most part, it is the lower 20% of the market that they own. This is reflected in the ASPs of the chips sold by both companies. Corporations tend to shop by value, consumers by price. Intel’s purchase of McAfee is a value add play.

The value added is not security though, I would expect Intel to shed that division of McAfee sooner rather than later. Intel bought McAfee for manageability software, specifically to integrate it with Vpro/AMT. They are going after the medium, large and Fortune 500 business set. Intel is now saying that they intend to compete with the HP, Dell, and IBM management solutions head on, and that will cause no small amount of friction among these cordial friends.

How does this make the $7.68 billion price Intel paid any more palatable? Easy, they will make it up in no time if the integration is successful. Intel sales people go a-visiting a big company and say, “If you buy the cheapest iSomethingmeaningless, you get a great CPU. If you buy an iSomethingmeaningless+2, you get a great CPU plus Vpro/AMT. Vpro/AMT lets you manage your boxes, comply with HIPAA, Sarbox, BoTox and Taliban Fatwa #42 at 1/3 of the cost of an non-Vpro machine.”

Since management is quickly rivaling power as the overriding cost of PC ownership, this is not a hard sell. If you look at the price difference between an iSomethingmeaningless and an iSomethingmeaningless+2 at the same speed, it is a handful of dollars, lets just say it is $25. The difference between the two chips is 100% artificial, it is quite simply a blown fuse, the cost to Intel is $0, plus or minus nothing.

Basically if they can upsell you to a +2 chip, they get $25. If you assume Intel sells 200 million chips a year, and 25% are candidates for this upsell, you are looking at $5.25 billion of additional income a year. If McAfee can make that upsell happen, it will pay for itself in almost no time. The synergies are huge.

As a side note, Intel tried to put antivirus in Vpro/AMT 1.0, and it failed miserably. The idea was simple, you put filters in to the chipset that can screen out strings on the fly and block harmful code before they get to the CPU or memory. That idea is fine and dandy, but it seems that Intel management didn’t understand the term ‘false positive’. Net result, they don’t talk about that any more, and several good people quit. The take home message is that hardware is the wrong place for security.

In the end, Intel’s purchase of McAfee makes perfect sense, is totally synergistic to the most lucrative part of the market, and is a very smart move. It will pay for itself in very short order, and has a very good chance of changing the corporate computing landscape. It will also piss off Dell, HP, IBM and several big software players. The only thing that is doesn’t have anything to do with is security.S|A

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Charlie Demerjian

Roving engine of chaos and snide remarks at SemiAccurate
Charlie Demerjian is the founder of Stone Arch Networking Services and SemiAccurate.com. SemiAccurate.com is a technology news site; addressing hardware design, software selection, customization, securing and maintenance, with over one million views per month. He is a technologist and analyst specializing in semiconductors, system and network architecture. As head writer of SemiAccurate.com, he regularly advises writers, analysts, and industry executives on technical matters and long lead industry trends. Charlie is also available through Guidepoint and Mosaic. FullyAccurate