Don't Underestimate Intel And McAfee

Intel and McAfee, the odd couple of technology? At first blush, Intel is not a "best fit" acquirer like HP or IBM which have major software businesses, existing security solutions, and related capabilities such as systems management. And, Intel is not a services company either. So it's straightforward to spot the potential problems that need to be addressed.

But a longer-term perspective indicates that these two companies are on to something fundamental and could create a force to be reckoned with within the tech industry. We believe embedded, or integrated, security is the future. The acquisition is ahead of the market and will thus accelerate this evolution. Standalone security products, and the companies that create them, are on borrowed time. We will see security embedded into hardware, in mobile devices, M2M devices, smart computing devices (e.g., smart grid meters), laptops, and just about everything else. Embedding security at the chip level is not a new concept either. Companies like Renesas and ARM already do this. Cisco has also been embedding security into the network, while Microsoft has embedded it into the platform. In systems, we see embedded security in Internet service provider (ISP) devices most prevalently today.

In buying McAfee, Intel is betting that it can embed security functions into the chip level (enabled by the software -- there's a software silicon interplay here), first on PCs and appliances, and then on a range of "post-PC" devices. It also doesn't have to be self contained in the hardware, but security functions in the hardware could be enabled by software from McAfee. That looks like the right vision to us. This goes beyond mobility and smartphones. In areas like smart grid/meters, healthcare devices, Internet-connected TVs and game consoles, and other "smart" technology to come, security will be built in, not bolted on.

Execution is another matter. Adoption of embedded security has barely started, so Symantec may benefit in the short run due to customer uncertainty over this deal, or organizational missteps in integrating the two companies. But over time, Intel’s strength in partnerships and channels will work in favor of this marriage. Intel could push McAfee technology into systems and devices before Symantec even begins conversations with customers, especially in the smart computing arena. On the mobile and portable devices front, the appeal of an embedded and more bulletproof security component could be used as a selling point against ARM.

Please weigh in via the comments; what do you think?

Comments

In the meantime

In the meantime, Intel can twist the arms of PC vendors to include McAfee rather than Symantec, thereby increasing revenues from that product. Clever move!

Intel, McAfee, and the channel

Ouch! And they say Industry Analysts are a cynical lot! :-)
I think Intel is already under enough anti-trust scrutiny to avoid this pitfall. Arm twisting aside, the notion of a software-silicon combination is powerful and compelling. Intel and McAfee together can create security and protection technologies that can be executed at the hardware level, but enabled and managed at the software level. Intel already does this with Intel's vPro and Anti-Theft, and we see this with other technologies such as OPAL disk encryption or TPM. McAfee would be a vehicle for Intel to rapidly realize such enhancements, given McAfee's footprint of client and network security solutions already out there. But anything Intel does would be open APIs that Symantec, Trend Micro, et al can all access. McAfee would simply be the aggressive adopter of these: Intel wouldn't develop such functions without McAfee adopting them as a means to bring them to market.
The other element of all this is the channel. Intel and McAfee both have a channel focused strategy, and both see managed service providers as the future for growth in the corporate market. This channel strategy and strength is one of the stronger points of synergy between the two companies, and a clear differentiator between McAfee and Symantec (which has a more independent, or at least dual-nature, approach to the adoption of security as a service). A near term challenge we've already seen arise is for the two companies to assuage their channel partners' concerns and clarify their strategy and tactics here. In the end, though, Intel and McAfee together can bring a broader value proposition to MSPs.

Yes, but...

Jonathan,

I get the point about integrating security at the most fundamental layer, but if others like Renasys were already doing this, couldn't they have acquired the expertise as billions of dollars less? It seems to me that so much of McAfee's business is so far afield of Intel's that they paid a lot of money for assets that are off point...or are they trying to diversify their business?

Glenn