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McAfee Acquisition To Change The Security Industry

Lumension Security : 23 August, 2010  (Technical Article)
Lumension's Pat Clawson provides the company's views on the purchase of McAfee by Intel and what this means for the IT security industry as a whole
Pat Clawson said, "Big news on the merger and acquisition front today as Intel announced plans to purchase McAfee for $7.7 billion. The announcement is definitely a game changer for the security industry, and comes on the heels of other recent IT security acquisitions this year including Symantec's acquisition of PGP, IBM's acquisition of BigFix and HP's acquisition of Fortify just this week. As a result of this particular acquisition, Intel can now deliver security as part of their hardware and device business line. This not only changes the fundamental security landscape, it will have a ripple effect throughout the industry.

"However many are asking why Intel would purchase a security company like McAfee and even more are asking if this makes sense for Intel. Let me share a few points for why I think the Intel acquisition of McAfee makes a lot of sense."

Advantages for Intel

"First, Intel owns approximately 80% of the market for PC's (desktop and notebook) and processors are a maturing market. There is no real growth there. Intel is not inside the new wave of smart phones which is, of course, the new platform for Internet access. In fact, Gartner points out that in 2010 more mobile/smart phones will access the Internet than PC's.

"The other major shift impacting Intel's core market is the trend toward cloud computing, where more of the infrastructure will be stored centrally and sent to very thin clients. So the acquisition of McAfee could do three things for Intel:

• It provides Intel with additional technology to add value in new mobile/smart phone devices which are coming under increasing attack by malware.
• It adds value to a mature market by potentially embedding security into the PC platform, thereby ensuring a better operating experience.
• It provides the capability for Intel to develop security within a Cloud Computing infrastructure.

"With the acquisition, Intel is addressing areas that need better protection - smart phones, televisions, medical technology, and cash machines. For Intel, this has given them a significant competitive advantage over other chip manufacturers, like AMD, at least in the short term, but it will no doubt make other chip manufacturers consider whether they need to define their own security play.

"From a bigger picture perspective, it is clear security has emerged as a core infrastructure pillar. According to Intel's CEO, "We have concluded that security has now become the third pillar of computing…with the first two 'pillars' as connectivity and energy efficiency. The bottom line is that this will better protect Internet users and their devices."

"I happen to agree and I think it is good to see IT security becoming an important part of a hardware manufacturers' core offering rather than something the consumer is responsible for after their purchase. Just like when you buy a car, you're not expected to go out and buy seatbelts and airbags as an aftermarket accessory."

Risks & Challenges

"There are some key challenges facing Intel however, and the 60% premium it paid for McAfee. Andrew Jaquith of Forrester positioned the acquisition as "a lot like a horseless-carriage vendor buying a leading supplier of buggy-whips." Meaning, Intel has not been very successful so far in extending its brand into the non-PC market.

"While McAfee recently purchased mobile security technology from firms like Trust Digital, it has not shown there is much of a market there yet. I personally believe that a substantial market segment will evolve in that space over time, however.

"In addition, Rich Mogull of Securosis points out that Symantec, EMC/RSA, and other security vendors will fight any integration of security and silicon aggressively and this will most likely force Intel to keep the platform open to competitors.

"I also have to wonder at the security value of Antivirus and if that will add any value to their efforts - especially in light of the fact Antivirus as a standalone technology is no longer effective in the current computing environment."

Advantages for the IT Security Industry

"On the flip side of all of this however, the acquisition represents a big change in the security industry food chain. To stay competitive, will the silicon manufacturers look to incorporate other security capabilities? Will technologies like application whitelisting eventually need to become part of the silicon offering?

"The Intel-McAfee acquisition also makes the top layer of the security stack - the likes of Symantec - obvious acquisition targets for chip manufacturers and also hardware providers.
Although Symantec would be a large chunk for any company to acquire, I wouldn't put it out of the realm of reason.

"We will also see continued consolidation at the middle of the market where mid-size security companies like Sophos and Trend Micro will gobble up smaller point technologies to integrate within security platforms.

"So the question becomes, if security comes to be a part of the large computing platforms, will there be room for best of breed or dedicated endpoint security platforms? I think the answer is yes. Going back to the car analogy, the larger selling platforms usually adopt innovations that have been tested and developed for advanced applications like motor racing. We will see the same thing here, I believe, in that companies will need depth of technology in security in addition to breadth. Core security offerings by large infrastructure providers like Intel and IBM will be a mile long but an inch deep and focused security suites/platforms can offer added depth that many companies will continue to need.

"Overall I believe this is positive news for the security industry in general as the relevance of our industry and the technology we provide has gained significant value today."
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