Intel-McAfee M&A: The Big Picture
We have just witnessed the largest security acquisition in history, as Intel has approved the purchase of McAfee for $7.68 billion. To provide some perspective, according to Updata Advisors, the IT security sector has drawn $25 billion in acquisitions since 2004. At first glance, it may not make sense that a hardware company is purchasing a software company. Why McAfee? Why now?
Security threats and vulnerabilities are constantly evolving, which makes it difficult for vendors to accurately predict where they should allocate resources in research and development. In fact, the trend over the past decade has been for many major players to ignore developing niche solutions, preferring to allow entrepreneurs and start-ups to battle over these spaces.
Eventually, emerging threats become mainstream and customers turn to the major vendors for solutions. However, as these vendors often chose to forego R&D into a solution, they must instead purchase it from another company via M&A.
Even in a down economy, we have seen how successful security companies remain. Cyber criminals are more active and increasingly sophisticated than ever before. Over the past two years, web-based attacks increased dramatically. As a result, companies have been forced to put resources into acquiring web-based security, such as Cisco’s acquisition of ScanSafe in 2009.
Today, the Intel-McAfee deal is about the future of computing, primarily cloud computing and virtualization. In this future, security will be embedded directly onto the hardware, possibly even the CPU, in order to realize the benefits of virtualization and cloud computing. When you combine multi-core chips with powerful virtualization and security software, security systems can actually run under the operating system.
As technology evolves, organizations looking to solve cloud computing and virtualization security problems will turn to major vendors. Judging from the Intel-McAfee deal, these vendors will attempt to solve these problems through M&A first and perhaps R&D second. With cloud computing and virtualization becoming ubiquitous, the trend is sure to continue. Who do you think is the next company to get acquired? Which companies need to step up to compete with Intel? Share your thoughts…
Posted by Clinton Karr on August 20, 2010 at 1:58 PM
