Why Intel's McAfee Deal Makes Sense

McAfee itself recently bought mobile security specialist tenCube, highlighting the company's desire to lock down data on mobile devices and smartphones.

McAfee, which missed Wall Street's estimates in its recent second-quarter results, has felt the impact of an uncertain economy. Set against this backdrop, the company's stock has fallen more than 26% this year, which likely prompted Intel to finally pull the trigger.

The McAfee deal, however, is not cheap, and Intel is paying $48 for each share of McAfee -- a 60% premium on the software maker's Wednesday closing price. The deal could have major implications for other security companies, according to Macquarie analyst Zelnick.

"Given the premium paid, we expect there were likely multiple parties interested in McAfee, which further supports our positive view of security software, especially Symantec which is the most similar asset in the space," he wrote. "We expect this deal will bode well for Check Point Software (CHKP), Fortinet (FTNT), Blue Coat Systems (BCSI), ArcSight (ARST), and software overall."

While there's plenty of renewed speculation bubbling up of Symantec as the next big security acquisition by a giant like Hewlett-Packard (HPQ), Dell (HPQ) or IBM (IBM), the company presents challenges to these types of buyers.

"Symantec has a lot of other stuff going on; McAfee is more of a pureplay device security company," said IDC's Del Prete, noting that Symantec is a much less attractive buy. There's also Symantec's major OEM deal with HP, which could make things complicated if Dell or IBM tries to buy it.

McAfee could also place Intel in a more favorable position against its competitors, namely AMD (AMD). "Although we question the likely returns on the proposed acquisition, we believe that it can aid product differentiation to help bolster Intel's already-dominant market share," wrote Clyde Montevirgen, semiconductors analyst at Standard & Poor's Equity Research, in a note. "[McAfee] could make its chips more salable in markets in which it has little penetration."

The deal is likely to pressure AMD to bolster its own product lineup -- or risk losing more market share to Intel in current markets as well as new ones (like mobile devices). Investors seemed to be following this line of thinking; AMD's stock dipped 18 cents, or 2.82%, to reach $6.39 in Thursday trading.

McAfee shares surged $17.22, or 57.53%, to $47.15 and Intel dipped 51 cents, or 2.61%, to $19.08.

-- Reported by James Rogers in New York

Follow James Rogers on Twitter.

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