McAfee inside: How Intel bid could shake up IT security

If Intel's bombshell bid last week to buy McAfee for $7.68 billion pans out, the companies pledge to bring an unprecedented level of embedded security to networked devices ranging from smartphones to servers, potentially changing the way in which security is delivered to enterprise IT shops.

Tech industry's M&As in 2010

Intel and McAfee have been working closely on a host of projects for 18 months and expect to show the first fruits of their labor early next year. Among other things, McAfee technology could complement Intel's existing hardware-based security and management technology, dubbed vPro.

While company officials wouldn't reveal details on what products might result, they did say that their combined hardware and software could be used to protect Internet-connected devices -- from handhelds to automated teller machines to cars -- from growing cyberthreats in a consistent manner.

McAfee CEO Dave DeWalt wrote in a blog post that the "current cybersecurity model isn't extensible across the proliferating spectrum of devices…. The industry needed a paradigm shift, incremental improvements can't bridge the opportunity gap." Intel CEO Paul Otellini got more specific at the acquisition press conference: "We believe that security will be most effective when enabled in hardware."

The combination of companies – McAfee would operate as a subsidiary within Intel's Software and Services Group -- could also open up new sales opportunities. "Everywhere we sell a microprocessor, there's an opportunity for a security suite," Otellini said of what would be the biggest deal in Intel's history. Though he stressed that Intel is open to working with other security companies as well. (A short history of Intel acquisitions.)

While it's not immediately clear what impact the deal will have on corporate customers, industry watchers weren't shy about issuing warnings.

"It scares me," says Gartner research director Peter Firstbrook, who worries about whether the deal will distract the Santa Clara security company from efforts such as uniting its assorted security projects under the ePolicy Orchestrator management system. He also has concerns for customers with heterogeneous hardware environments that Intel and McAfee technologies might become too entwined to the exclusion of others.

However, Firstbrook does acknowledge that McAfee could bring Intel R&D that will improve its processors and provide hooks into its hardware that could be exploited by McAfee and other security vendors.

Forrester analyst Andrew Jaquith questions the whole premise of tying security so tightly to hardware. "Most enterprises take the least-common-denominator approach to managing their computing assets,” he wrote in a blog post. "This is largely because refresh cycles cause hardware platforms to stick around much longer than software-based ones: it is easier to push down a software update than to pull a motherboard. I am not convinced that a hardware-based strategy for security will resonate with enterprise buyers. If you need convincing, ask yourself: how many of the PCs in your organization run Intel vPro-capable hardware? Don't know the answer? Right: this is exactly my point. Despite Intel's efforts to add more differentiating "professional" features on and around their core processor silicon, these are seen as a bonus, rather than the centerpiece of enterprise management strategies. It is hard to see how 'McAfee Inside' would work out any differently."

Allan Krans, senior analyst for Technology Business Research in Hampton, N.H., says the deal is not without challenges, but does think it could result in IT shops seeing a difference in how security is delivered.

"The prospect is clearly there to embed more security features right into the chipset, whereas now a lot resides above the hardware and even operating system level," he says. "Some of the security features customers currently pay separately for may be embedded in the hardware as a result of this acquisition."

Krans says the deal reminds him of EMC's RSA buyout in that EMC wound up "building in rather than bolting on security…[Buying McAfee] will enable Intel to streamline the delivery of more security functionality and also differentiate its hardware offerings in the market."

Intel-McAfee impact on software security market

The proposed buyout also raises many questions regarding the security software market, which Gartner expects will grow as much as 11.3% to $16.5 billion this year. McAfee – with about $2 billion in revenue last year and 6,100 employees – is currently the No.2 company in the market behind Symantec, but a hungry pack of vendors including Trend Micro, IBM, HP and Cisco is also fighting for its share, with HP earlier in the week snapping up software assurance company Fortify.

Krans notes that the deal would make Trend Micro the only true pure play security vendor among the biggest players, eliminating one of McAfee's current differentiators vs. Symantec, which also sells storage and systems management tools and has been in the process of better focusing its security offerings. (Interestingly, Intel sold its antivirus business to Symantec in 1998.)

Symantec holds just over 20% of the security software market worldwide, and while that's not bad, it's actually down from the 24.11% share it had in 2007 and the company recently warned of cautiousness among tech buyers. The company's stock price rose following the announcement of the Intel-McAfee deal, with speculation Symantec itself might be the next security company to find a suitor.

"The competitive landscape for us is changing," says Bill Robbins, Symantec executive vice president of worldwide sales, discussing the overall market prior to the Intel-McAfee announcement.

Symantec just spent many millions of dollars to buy PGP, GuardianEdge and VeriSign's authentication business to get encryption and certificate technologies. (Trend Micro will soon be unveiling some encryption-related plans as well.)

Such diversification isn't a bad idea, since selling security to the enterprise is increasingly a matter of having lots of different enticements to offer the customer--sometimes a giveaway in a bundled offering. "I've seen deals where the encryption is free," noted Gartner analyst Neil McDonald discussing the topic recently.

Though fellow Gartner analyst Firstbrook isn't quite sure how some of McAfee's products, including firewalls and secure Web and e-mail gateways, will fit into Intel's long-term plans. He also questions how the companies' cultures will mesh, describing Intel's as staid and McAfee's as more aggressive in that it is used to reacting quickly to the latest cyberthreat.

McAfee's big push of late has been security for smartphones, including the iPhone and Android-based devices, whether in the hands of the consumer or the business person.

To that end, McAfee recently acquired mobile-device management vendor Trust Digital, used in the enterprise, and Singapore-based tenCube in the consumer area. Symantec's approach so far has been to develop software in-house, including its Mobile Management product introduced last November, according to Khoi Nguyen, group product manager in Symantec's mobile security group.

McAfee's recent acquisitions are seen as being a good fit with Intel's visions of securing all Internet-connected devices -- the 5 billionth of which this month is expected to be plugged in, according to IMS Research. Those deals, and Intel's proposed buyout of McAfee, also would seem to fit with Intel's acquisition last summer of Wind River, a maker of embedded technologies used in mobile devices. Otellini says that the McAfee buyout supports Intel's contention that security, along with Internet connectivity and energy efficiency, are the three most important pillars of computing today.

IDG News Service contributed to this story.

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