Analyzing Intel's Deal To Buy McAfee

Chipmaker Intel is buying security software maker McAfee for $7.68 billion. Don Clark, San Francisco deputy bureau chief of The Wall Street Journal, offers his insight.

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ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

And there was big news this week about the insides of your PC or your cell phone or just about anything with a chip inside of it.

Intel, the big chipmaker, is buying McAfee, the big security software company. And the value of the deal is big - $7,680,000,000. What's in it for Intel?

Well, we're going to ask Don Clark in San Francisco, who covers technology there for The Wall Street Journal.

Welcome to the program.

Mr. DON CLARK (The Wall Street Journal): Hi.

SIEGEL: And this is Intel's biggest acquisition, ever. Why are they buying McAfee?

Mr. CLARK: Well, you remember in the PC business, Intel has this great big friend called Microsoft, so Intel chips run the Microsoft software - and that's been a great partnership for Intel. But Intel wants to get into other areas. And in some of these other areas, like cell phones and appliances and things, they don't have a big friend, a big software friend.

So they've been realizing that to get in those areas, they have to play in software. So this deal was part of that strategy. However, it really surprised people because security software is not considered as central as like an operating system. So I don't think people were expecting Intel to go into something so specific and seemingly specialized as this.

SIEGEL: And Intel doesn't have a big record for acquiring different kinds of businesses and expanding into different activities for making semiconductors.

Mr. CLARK: That's right. They did some of that during the Internet bubble, and they spent about $10 billion on a lot sort of midsized acquisitions, and it really didn't work.

One of the new elements in their thinking now is instead of trying to fold them into Intel, where they kind of got lost in the past, is to keep them a separate subsidiary with their own management and their own expertise, and kind of let them be a profitable freestanding company, at the same time, serve Intel's strategic goals.

SIEGEL: There is a tremendous amount of talk nowadays about cyber security. Do you think that that accounts for some of the interest that Intel has in McAfee?

Mr. CLARK: Definitely. Basically, what they sort of said was we've decided that it's not just about speed anymore or energy efficiency - the main watchwords for Intel. It's also about security. It's no longer kind of an add-on you can bolt on the outside of the system. You really have to build it in from the start, so one of the big ideas about this deal is to get the expertise of the McAfee folks to help Intel build circuitry into its marked processors that could help the security problem.

SIEGEL: What does this likely mean for consumers, the purchase of McAfee by Intel?

Mr. CLARK: One of the things it could mean is just better security in your products. So people are used to having to download and install anti-virus products and other security products, and that works to some degree.

But it's possible in the future that essentially security could just be better in a lot of these products, like cell phones and Internet-connected TVs where people are not used to installing software. There could be approaches to build software in that would kind of avoid them becoming big targets for attackers.

SIEGEL: But there is some skepticism about this deal. People are saying, you know, people with cell phones complain more about losing the signal, let's say, than about not having good enough security software on the cell phone.

Is there a real demand for this in the market right now?

Mr. CLARK: Well, that's a good question. I think it's one of these things where demand never starts until there's a really big problem. So I don't think that many people have experienced a real security problem on their cell phone yet. But you figure out, you know, with a billion and a half cell phones and they're becoming more computer-like every day and more programmable, that they will become more attractive targets to hackers and attackers. And I have the feeling that it'll just take a couple of major incidents before people start worrying about this.

SIEGEL: Don Clark of The Wall Street Journal in San Francisco.

Thanks for talking with us.

Mr. CLARK: Very good.

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