McAfee do more than just desktop antivirus: for example, they have mobile, virtualisation and network security products. see products by category here:
http://www.mcafee.com/uk/enterprise/index.html
Intel has a large interest in mobile, virtualisation and network arenas; this isn't really as surprising as you make out.
McAfee also has strong UI programming expertise that Intel sorely needed. Intel's IPP and MKL libraries are absolutely great, but VTune looks like it is fresh out of 2002. They get access to several stable revenue streams (like antivirus), and can cherry-pick talent to work on whatever projects they want. There aren't many downsides for Intel.
We're talking about $7.7 billion. I'm not sure it's quite as rosy a picture as you paint. I'm not that familiar with McAfee's annual profits, but even if they make $500 million a year, we can value the talent they cherry-pick at an absurdly high value of $1 billion, and it would still take Intel well over 10 years to recoup the investment, assuming stable revenue streams.
A simplified perpetuity of $175m @ 6% would have a PV of ~= 3b. I'm having trouble seeing how they'd ever break even based on profits alone. I just can't imagine what kind of integration with existing products they think will add another 4.7b.
Thanks, I was about to head into a meeting and didn't have time to do the research. Assuming $175 million in profits per year, that means 44 years to breakeven, ignoring the talent acquisition angle. How much are 20 (or even 50) good programmers worth?
They would be ecstatic with that kind of return. Without growth and still making a hefty return. McAfee has ~$2b in revenue but an operating income of "just" $221m.
Several other companies in that market went down a similar amount, so it doesn't seem to be extraordinary. I would expect a lot of tech investors to move their money to McAffe after that announcement hoping to get something out of it.
What matters is what happens after now. If it continues to go down for a long time, it might be a problem.
It seems strange that Intel is investing in this particular sector that leverages mostly Windows stuff. They should move out of Steve Ballmer's basement and make their own OS.
Why do they want to make software for platforms when their competencies are on hardware?
One that doesn't look like a antivirus program for Windows.
"They should move out of Steve Ballmer's basement and make their own OS." and "Why do they want to make software for platforms when their competencies are on hardware?" at the same time.
They're leapfrogging to a niche market of going from hardware to security on the Windows platform. What's the gain in getting into an specific platform's flaws (antivirus) and development environment? That's the corner of the platform itself, not to mention the scope of the OS industry.
If they want to do software, they should develop a OS, maybe for Atom or some kind of mobile platform or otherwise.
My bullet points are just pointing out some icing on the cake that comes with the deal.
"Why do they want to make software for platforms when their competencies are on hardware?"
Vendor lock-in and community are just as helpful for Intel as they are for other businesses. If they can grease the wheels for their primary business (even at a small loss), then it's not necessarily a bad idea.
Intel has a large interest in mobile, virtualisation and network arenas; this isn't really as surprising as you make out.