Intel to challenge rival ARM with McAfee buy

McAfee customers may be worried about the acquisition

Intel’s announcement that it will acquire software firm McAfee for a cool $7.68bn (£4.9bn) took the industry by surprise.

However, it is now clear that the move was stimulated by aspirations to challenge British company ARM Holdings, which makes processors for the iPhone.

Moments after he spoke to McAfee CEO Dave DeWalt following the announcement, Gartner research director Peter Firstbrook told Computing the significance of the acquisition.

Intel acquired Wind River last year, a firm that has developed an embedded operating system for processing devices.

The chip manufacturer is now looking to pair up its operating system with McAfee’s security technology, and integrate those technologies with its own CPUs to create an offering for the embedded processor market for products such as smartphones and in-car electronics.

“Intel is big in the tablet and up market but in the embedded processor market, ARM is far more prevalent. Intel now wants to move downstream and add value to the Intel chip for the embedded processor market,” explained Firstbrook.

“This is where ARM is really successful and Intel is not so successful, so they want to go downstream and they want to differentiate their products from ARM's. If they can add security to the embedded processor chip, they can gain market share and take it away from ARM.”

However, while this makes sense from Intel’s perspective, McAfee customers may be worried.

“If I was a McAfee customer, I’d say that’s all fine for Intel but it doesn’t give me any comfort. Intel doesn’t care about the networking business that exists at McAfee or the existing installed base.”

Firstbrook said that Intel is a conservative company that does not waste money and it will be looking to maintain McAfee’s customer base. However, the intention is still very much to challenge ARM’s position in the embedded processor market.

Yet even acquiring the software security firm to differentiate its embedded processor offering from ARM’s is a risky strategy at this stage, in Firstbrook’s opinion.

“Those systems are not under attack, nobody is screaming for security for their in-car gadgets, or even for their cellphones.

"Anti-virus for smartphones – the products that McAfee is currently offering – exists as a market, but it is miniscule. Security companies have been plugging it for years, but still nobody’s buying.”

Although the market could accelerate in the future, the fact that it is still early days for the smartphone security market makes the McAfee acquisition a risky bet, he said.

“It’s dangerous to get in early. All the anti-virus companies made an investment in phone security five or six years ago but they haven’t made a penny from it yet. Certainly it’ll be necessary in the future, but do we need it that low in the technology stack – at the CPU? I’m not so sure.”

Last year, McAfee acquired a product called Solidcore which is a lockdown tool used in ATMs, hospital equipment and other embedded systems. This product prevents any way of running rogue coding on those systems, and may prove to be the most valuable property that Intel has now acquired.

“McAfee acquired Solidcore last year and if that was the piece Intel wanted, they missed an opportunity last year when McAfee acquired it. They wouldn’t have had to spend all that money on things that they don’t want, such as the networking components.”

There is still a chance that this gamble could pay off for Intel. McAfee is ranked at number two at the moment so the buy can be seen as a shrewd move.

“McAfee’s market cap just dropped dramatically because it missed expectations for the first quarter of this year and it hadn’t missed in a long time,” said Firstbrook. “Its market cap went way down so if Intel wanted to pull the trigger on McAfee, now was a good time to do it.”