Why Intel bought McAfee

http://arstechnica.com/business/news/2010/08/why-intel-bought-mcafee.ars

by tortilla • 16 years ago

29 19 16 years ago

tptacek6• 16 years ago

For anyone looking for the decoder ring here: vPro is the Intel code word for hardware products that support hardware virtualization, TXT (crypto-signed executable memory security), and out-of-band management via the Intel AMT management engine doohickey.

A "vPro" application for McAfee might, for instance, be to embed the AV engine in a slim hypervisor layer, invisible to the OS, and to have it report status to a mothership using the AMT engine.

People have been talking about Intel baking McAfee into hardware without realizing that they have better options than that.

moe• 16 years ago

A "vPro" application for McAfee might, for instance, be to embed the AV engine in a slim hypervisor layer, invisible to the OS, and to have it report status to a mothership using the AMT engine.

Nice. A vendor controller hypervisor with full access to the system and supposedly no way for the user to alter or inspect the code it runs...

What could possibly go wrong.

wccrawford• 16 years ago

Actually, my first thought was "Man, that would be a great spot for a virus." If other code can get in there, why not?

tptacek6• 16 years ago

AV hypervisors are no harder or easier to inspect than any other piece of closed-source software. The world runs on closed-source, from Cisco and Juniper routers to NetApp storage appliances to WinAPI OS's. This is no more (or less) sinister than any of that.

Intel seems almost fastidious about not imposing this stuff on Linux; from what I can tell, almost all of this stuff is open to Linux kernel developers to take advantage of.

So mostly I think you're just FUD'ing for karma.

_delirium• 16 years ago

Thanks for the brief definition. My usual practice of using Wikipedia for that purpose failed in this case. It looks like Intel Marketing must have been editing their own Wikipedia article, because this is mostly marketing-speak nonsense: http://en.wikipedia.org/wiki/Intel_vPro

tptacek6• 16 years ago

The vPro marketing is unbelievably bad.

The vPro idea is very concrete. It is:

* Crypto-signed control of executable memory and execution environment.

* Hardware-assisted hypervisors that use that crypto security to protect their boot.

* An off-core management processor (like the Sun lights-out-manager) with a secure channel to the hypervisor and a PKI-based system for secure remote communication.

You can think of a lot of cool things to build for an enterprise IT shop with those particular lego blocks.

katovatzschyn• 16 years ago

Wanted to give dododo credit for bringing up this angle immediately upon the announcement:

http://news.ycombinator.com/item?id=1617216

wslh• 16 years ago

> People have been talking about Intel baking McAfee into > hardware without realizing that they have better options than that.

I buy the point of the article about using McAfee channels for selling, technically, a smaller (less than $ 7B) team can glue hardware with security.

sdz2• 16 years ago

Yes, it's clear that Intel wants to make security a top priority. However, this article still doesn't explain why acquiring McAfee in particular makes any sense, especially at a cost of $7.7 billion.

Yes, it does say that the "McAfee purchase gives Intel an instant foothold on countless PCs," but these are not the PCs that Intel is after. These PCs already have Intel chips on them. Intel presumably wants security as a headlining feature for their next generation chips to entice users to upgrade.

In addition, Intel can gain an even wider-reaching foothold into your PC by bundling a driver and distributing it through Windows Updates, as it does already with its integrated video solutions. They presumably wouldn't need to pay Microsoft $7.7 billion for the priviledge of making Windows more secure.

Aside from the foothold in your PC, then, what is left of the "long-term, strategic buy"? There might be some patents and some talented developers, but for a company that already spends $5 billion on R&D every year, it's hard to understand why Intel couldn't come up with an in-house solution.

No, the real reason why Intel bought McAfee is probably much more pedestrian: Intel is simply sitting around with too much cash earning too little return.

tptacek6• 16 years ago

(1) McAfee is a cash register that can be valued at some multiple of the next N years earnings.

(2) Intel has a huge and underutilized repertoire of security infrastructure technology that it can't, as a hardware vendor, fully exploit right now.

(3) McAfee has a huge installed base across the Fortune 1000.

(4) McAfee and Intel were already collaborating on integrating AV with hypervisors and remote management.

From a strategy perspective, this seems pretty straightforward. Intel is vertically integrating. ISVs weren't taking advantage of Intel's existing security investment, probably in part because the industry was structurally resistant to that happening. Rather than waiting and hoping for the stars to align, Intel is taking control of its own destiny.

oiuyhftgrghj• 16 years ago

(5) Some VP at Intel wants to be a big man on Wall St and get his pic in the WSJ.

He finds a strategic acquisition candidate that doesn't upset the regulators (unlike say buying Arm or Nokia)

He spends a bunch of other peoples money on it, he skips to a new job before the whole sorry mess collapses around him.

sdz2• 16 years ago

I agree that there is a strategy here. However, every strategy needs to be evaluated relative to the cost, and from my point of view, the price that Intel is paying to execute this strategy is too high.

If we look at MFE's peak earnings from FY2009, it's $173m. So a $7.7b price tag is just under 45x. In other words, it'll take 45 years of FY2009 earnings to merely regain the initial investment. Now let's be more generous and give Intel a low discount rate of 5% and assume that those earnings grow compounded 10% each year. It will still take 25 years for Intel to make back that investment.

Of course, the investment gets better if there are synergies that will provide additional boost to Intel's earnings, but what are they? I don't really buy (2) since Intel has shown that they are capable of getting their software onto your computer when they want to (see their integrated video drivers that download through Windows Update).

But even if they couldn't, they could have just continued collaborating with McAfee without buying them. That's essentially the exact same thing as what's happening now, minus the big transfer of wealth from Intel shareholders to McAfee shareholders.

I suppose that I'm just not convinced that Intel couldn't have rolled their own solution for less than $7bln. Even if they really needed to buy McAfee, a 60% premium over the market price is pretty steep, and it's hard for me to see how that adds more value to Intel shareholders than a 7% special dividend or buyback. So far, I haven't seen an argument that's made me think, "Oh yes, that IS something I'd pay $7 billion for."

protomyth• 16 years ago

This line in the article makes me a little weary of Intel: "He then told an anecdote about how he was watching Intel CEO Paul Otellini being interviewed by Charlie Rose, and Otellini told Rose, "I've given our company a charter to make [security] job one." Rattner laughed and told us that this statement seemed to come from out of the blue, and it took him and other Intel execs by surprise. But from that day forward, Rattner was focused on security."

I wonder how many other projects at Intel got started this way.

yellowbkpk• 16 years ago

I like this explanation better:

Intel CEO: "We need antivirus, can someone buy me McAfee?" Few hours later: "Done." "Great, which version?" "Version ... ?"

(From http://twitter.com/paulmutton/status/21646042097)

cryptoz• 16 years ago

Not sure why you're being downvoted. I laughed!

sahaj• 16 years ago

sounds like a bet that corporations and consumers will return to buying PCs in the very near future since they have delayed their purchases because of the recession.

Vitaly• 16 years ago

Intel CEO: I need an antivirus. Can you buy me something?

Some time later, his assistant: DONE! We just bought you McAfee.

Intel CEO: Cool! What version?

Assistant: Hmm, version?

Why Intel bought McAfee

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