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Intel and McAfee, combining computer chips and security

Janet Babin Aug 19, 2010

Intel and McAfee, combining computer chips and security

Janet Babin Aug 19, 2010


Tess Vigeland: The world’s largest chipmaker is now in the business of keeping the data on those chips in lockdown. Today, Intel announced it’s acquiring McAfee, the software security firm, for $7.7 billion. It’s the latest in a string of large corporate deals. Earlier this week, Dell purchased storage company 3PAR and BHP Billiton launched a hostile bid for fertilizer giant Potash. In the wake of the recession, companies are working to get their fiscal houses in order. They’re putting off hiring and avoiding big capital purchases. And now some are spending that hoarded cash on mergers and acquisitions.

Janet Babin reports.

Janet Babin: Silicon Valley giant Intel is known for its hardware — processors, computer chips. McAfee is synonymous with software security software and customer services. So this acquisition flummoxed many analysts.

But tech analyst Tim Bajarin at Creative Strategies says computer chips and security software, go well together.

Tim Bajarin: There are actually a lot of creative ways you could find to tie security to the hardware that makes this deal make more sense.

As in, a security system built right into Intel’s next-generation chips. Bajarin says McAfee could help Intel do that. It could also push the company into gadgets and smartphones.

Michael Gartenberg with the research firm Altimeter Group says Intel wants to be known for securing PCs and handheld devices.

Michael Gartenberg: In a world of connected devices, secure connections is extremely important, and I suspect that probably had something to do with why they paid the price.

And it’s a steep one: Intel offered a 60-percent premium for McAfee’s shares. Like many companies, Intel tightened its belt during the recession and is sitting on a lot of cash. Last month, it reported its largest quarterly profit in a decade.

Steve Nelson’s a venture capitalist at the Wakefield Group. He says more companies are looking to make deals, but there’s still a high bar to getting them done.

Steve Nelson: Until we get the job market back where we need it, and consumer confidence with it, and people willing to take some risks — and that includes businesses — I still think the real health could be a year or two away.

Real health is still closer though, than it was in 2008.

I’m Janet Babin for Marketplace.

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