Merger of Intel and McAfee

Executive Summary

When Intel announced it was to purchase McAfee for a price of almost $8 billion, it caused a lot of head scratching among industry analysts as many did not see a clear business logic to go for this acquisition. It made little sense for a hardware player in the semiconductor business to purchase a company that is purely security software focused. Would Intel be able to pull off a successful merger and gain the benefits it anticipates from this deal?

Through this report we shall analyse the merger to determine whether it can be considered successful or not. We shall look ar the rationale for the reasons that motivated this acquisition, how it was executed and what was the outcome.

Table of Contents

Welcome to my report on the merger

Introduction

Company Profiles

Intel Corporation

Intel is the world's largest semiconductor chip maker. It is based in Santa Monica, California in the USA. It is an American company and listed on the NASDAQ exchange (INTC). Intel's core business is hardware related and it manufactures processors used in computers bot servers and personal computers. It also deals in other hardware used in a wide variety of electronic devices and wireless communication equipments. It employs almost 82,000 employees worldwide .

Major competitors include AMD with which it competes directly in its PC market. Intel is dominent here grabbing 80% of market share . However of late with PC sales slowing the company is trying to launch into the mobile market where the competition is much stiffer and Intel is playing catch up with much more successful companies like ARM which power most modern smartphones.

McAfee

McAfee is a software company also based in Santa Monica, California whose core expertise is security software. Its software are sold to both consumers as well a enterprises. Its software includes antiviruses and anti spyware which protect systems from malicious attaches, adware and malware. McAfee is one of the leading companies in this field trailing only Symantec in terms of market share. Its employee count is around 7000 people .

McAfee mostly concentrates on the PC software market, however of late they too had started to work on security software for the mobile market providing antivirus, anti theft and app protection services.

The Acquisition Decision

Background

Intel was losing business due to declining PC sales . Year on year PC sales were showing declines and industry pundits were estimating this was a trend that would continue. Faced with the prospect of falling revenues Intel needed to quickly adapt itself to the changing IT market. Mobiles where showing strong year on year growth. Both the tablet market and smartphones are heavily reliant on non-Intel chipsets. Based on the ARM platform chips made by Qualcomm along with other players hold significant market share in these sectors and Intel wanted in on the action.

Intel had begun its push for mobile on both the software and hardware front. It has invested in the development of Meego a Linux based OS for mobile devices. Similary on the hardware front it has developed chip platforms like Medfield which it is now providing to vendors in emerging markets who are developing Intel based phones .

Secondly Intel's computer processors have long had hardware security technology like vPro built into them but it was reliant on the OS supplied by other firms to take advantage of these technologies. Intel now wanted to make its platform more secure by taking the software side of it into its own control. Security was becoming a major concern for Intel going forward .

Software was never Intel's strength, so it would not be ideal to setup its own dedicated security software division. It would be quicker and more fail safe to aquire a firm that had the products and services Intel could leverage in its future plans.

This had Intel looking to snap up a company that had the right expertise in security software with a large customer base. Intel had already been working