Intel's doomed McAfee foray

Intel has never been satisfied with being the King of Processors, even though they've built an enormous and lucrative business.
Written by Robin Harris, Contributor on

Intel has never been satisfied with being the King of Pop Processors, even though they've built an enormous and lucrative business.

12 years ago, Intel went on another buying spree. The target was the communications market.

Everyone knew that communications and computers were converging. What could go wrong?

Oh, it is a different business that Intel didn't understand? Who could have guessed?

After writing off those investments, Intel got out of the business in 2006:

Intel's sale of its chip business for mobile handhelds and cell phones . . . is intended to enable the company to get back to basics. The sale will also remove a business that struggled to take off . . . despite billions of dollars in investments.

Consumer electronics consumes Intel And 9 years ago, Intel invested heavily in consumer electronics. An MP3 player, the ChatPad and the WebTablet were all stillborn, as were a number of other not-nifty-enough ideas.

More write-downs followed.

Leveraging product synergies - symbiotically! Intel's patented Delusion Enhancing Technology - Wintel's answer to Apple's patented Reality Distortion Field - is cranked to 11. Why?

  • There's nothing at McAfee that Intel couldn't use simply by licensing it - for billion$ less.
  • There's nothing that McAfee as a wholly-owned subsidiary will give to Intel that it won't also want to license to other chip vendors.
  • If Intel's mobile chip strategy is successful, they'll be sued by competitors on antitrust grounds and required to share McAfee's technology. Intel's $7.7B will be for naught.
  • If it isn't successful, Intel's $7.7B will be for naught.
  • It's already been tried: storage vendor EMC - they own VMware - bought RSA Security 4 years ago - with the same idea. Much grand vision - darn little to show for it.

The only good thing about the acquisition is that Intel gets a $2B company with 80% gross margins - not as good as Microsoft - but better than Intel's. But Intel shareholders won't see joy until the 3rd year - if the write downs haven't already begun.

The Storage Bits take Intel is a great company and a fabulous success despite their core incompetency: fuzzy thinking about things that aren't processors or process technology.

Chasing purely technical solutions to security when much of the problem is the wetware punching the buttons is doomed. Stepwise enhancements - yes. Significant competitive advantage - no.

The bright side: some of McAfee's most brilliant employees will take the Intel cash and start their own companies. That will be good for all of us.

Comments welcome, of course.

Editorial standards