Intel recently acquired (subject to approval) McAfee one of the leading (but not leader) in the area of computer security. The is a well thought out article in Forbes by Ed Sperling which you can read here. I have been reading a lot of article criticizing this move my former employer. As readers of this blog know I am often critical of Intel. Frankly, I think the company has displayed a lack of leadership (sorry Paul) and has been going sideways for the last ten years or so (ever since I left some may say…joke). I believe that security and protection is both an opportunity for Intel and by its absence a limitation to Intel and all the other computer companies. I don’t mean just protection for virus and hacking or even content protect. I personally have a much broader view of this which I will write about when I finally finish “Ten Trends for Ten Years” a project I am working on for myself.
I remember getting Intel to put in a processor ID which meant that each processor was unique. I saw how this could be used to provide protection but when customers found out about it, they screamed. They thought we were going to use it to track what they were doing. I wish I could remember when this happened and which processor. I know this happend again in 1999 but I am pretty sure this was the second time. Later, at what is now Intel Capital, I invested in in RSA. Sometime later, we made the first investment in Verisign. I saw Verisgn as a very important ingredient in making the internet safe for commerce. I think we invested just a million or so and sold our interest later for 100s of millions. But Intel did not take advantage of our special relationship with Verisign unfortunately.
About three years ago I had an opportunity to share some of my thinking with a senior members of Intel’s management about strategies that could be taken to increase growth. One of the things I pushed was security. I doubt that my suggestions had anything to do with their decision. They stopped listening to me the day I walked out the door or even earlier. But I am happy the reach the same conclusion.
Now I hope that they can make the acquisition a success. The will be a tall order. It is very hard to make acquisitions work and especially difficult for companies like Intel that are very internally focused. But Renee James who will be the responsible person at Intel for McAfee is a very capable and if anyone there can make it work, she can. I wish her luck.
Avram, your hope is touching, but I fear it is misplaced. This is not due to a failing on the part of Renee James, but it misunderstands something fundamental about what kind of company Intel is. In short, Intel is a MANUFACTURING company. That is what most of its employees do, what it spends the vast majority of its capital on, and what continues to be its revenue and profit driver in the face of the near-collapse of its monopoly on 32-bit processors for personal computing.
As I’m sure you would agree, Intel’s mistakes are legion: it invested in desktops when it should have invested in mobile; it invested in data centers when it should have invested in the cloud; it invested in multi-core when it should have invested in low-power — the list goes on.
But more importantly, Intel ALWAYS invests in software as an adjunct to, and support for, its processor business. Those investments are viewed similarly to marketing programs — expense items, not a chance to build new expertise independent of chips. As such, they always fail. They are not given independence, sufficient support, or sufficient time to succeed. They are usually staffed with chiphead loyalists who don’t really understand the software market. Intel seems to only succeed at software when they give it away, and this may end up being the end game for McAfee.
Intel will go on making semiconductors, and will likely stay the best in the world at doing so for some time to come. But they’re not going to magically become an innovator in computer security (or any other kind of software) by buying McAfee. But they stopped listening to me that day I walked out the door as well.
I concur with Steve’s view that software has never been a core activity but an enabler of higher CPU sales. There is nothing fundamentally wrong with that approach, and broad cooperation with the software industry has been Intel’s successful strategy for many years. I suspect that the acquisition of McAfee will turn Intel into a competitor of many other successful security companies, and severe these important cooperation links.
As to whether the acquisition is going to be a success, this is the classic triumph of hope over experience given the hash that was made of essentially all the previous acquisitions. I fear the shareholders (of which I am not) would have been better served by a large dividend check. They could have put 60% of the proceeds in McAfee stock and kept the rest.