Intel buying McAfee for nearly $8 billion

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Intel Corp. is buying computer security software maker McAfee Inc. for $7.68 billion in a move that “reflects that security is now a fundamental component of online computing,” the Santa Clara-based chip maker said Thursday.

The $48-per-share price is a 60% premium over McAfee’s $29.93 close on Wednesday. The company, also based in Santa Clara, has seen steady growth and will report to Intel’s Software and Services Group.

Intel shares slid 3.4% to $18.92, but McAfee shares boomed nearly 58% to $47.21 in morning trading.

Cyber threats are surging, Intel said, and current security measures don’t effectively cover mobile and wireless devices or all the televisions, vehicles, medical devices and ATM machines that can now connect to the Internet.

“Hardware-enhanced security will lead to breakthroughs in effectively countering the increasingly sophisticated threats of today and tomorrow,” said Renee James, Intel senior vice president .

The deal has been unanimously approved by both companies’ boards of directors and is waiting to be cleared by shareholders and regulators.

[Updated at 11:30 a.m.: The acquisition, one of the year’s largest technology deals, would allow Intel to mix McAfee’s anti-virus technology directly with its physical chip hardware. The combination would better protect against increasing threats such as viruses, hackers, phishing scams and more, the company said.

Intel has been working with McAfee for more than a year and a half on protective technology. The company is looking to follow Apple’s model in creating ‘tighter integration between hardware, software and security,’ said Craig Berger, an analyst with FBR Capital Markets.

In 2009, Intel acquired mobile operating system firm Wind River.

‘It’s a nice, incremental strategic opportunity for Intel to get away from being just in chips and instead having a more differentiated, diversified and hopefully long-term sustainable model,’ he said.

The deal was a surprise to some analysts, who said that chip makers haven’t traditionally been a strong player in the computer security market.

Intel will have to compete against dedicated security software developers, such as Symantec Corp., that have long dominated the market, said Erik Suppiger, senior research analyst at Baltimore-based investment bank Signal Hill Capital.

But the deal could spark other acquisitions in the multibillion-dollar IT security market, he said.

‘We’ll have to see if Intel can execute, because there’s been a strong case so far for the best of breed,’ Suppiger said. “But there are some pretty good growth opportunities as the number of devices grows with the adoption of wireless.”]

-- Tiffany Hsu

headquarters of security software maker McAfee Inc. in Santa Clara. Credit: Paul Sakuma / Associated Press