is paying a handsome premium to acquire
, a leading security software developer. Intel's bid values McAfee at $48 a share, which is about 48% higher than the Trefis fair-value estimate of $32.35 a share.
McAfee's business has expanded with the breadth and complexity of online security threats. The company's revenues grew by nearly 20% last year, to $1.9 billion. Intel hopes to gain a competitive edge over rival
by integrating McAfee's security software in its microprocessors and chipsets.
We estimate that McAfee's security business could yield a 3% upside to the $24.30 Trefis stock price estimate for Intel. Our analysis follows below.
Security in a wired world
In the past, Intel and other chipmakers have focused mainly on delivering energy-efficient performance and connectivity. But online security threats have proliferated over the years with new, Web-ready devices like notebooks, mobile phones and tablet PCs. As a result, security is now a central concern for the hardware industry.
Intel maintains that the dizzying variety of online security hazards must be fought with a combination of software and hardware. By embedding McAfee software in its processors, Intel hopes to gain a significant technological advantage over AMD.
We estimate that Intel's most important division, notebook processors, accounts for roughly 46% of its share value. Intel captured 79% of the notebook processor market in 2009. We currently forecast slight share gains for Intel in this market going forward.
However, we see a potential upside of 2% to 3% for Intel's stock if it manages to gain an additional 2% of the notebook processor market by embedding security software in its processors. You can drag the trend-line in the chart below to create your own notebook processor market share forecast for Intel and see how it impacts the company's stock price.
You can see
the complete $24.30 Trefis price estimate for Intel's stock here.
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