IndiaTechOnline's take:  The end game could be your smart phone

Chip leader Intel’s proposed acquisition of security technology player McAfee for just under 8 billion dollars, announced earlier this week, may be an early warning of an emerging technology trend: the tight bundling of security solutions into customer end products like PCs, Net access devices -- and Web-connected hand phones.

It may also be a canny recognition of consumer reluctance to deal with multiple vendors – for hardware, software, applications and security -- when making a device purchase decision. Let’s face it, in the 25 odd years since PCs become items of lay usage, the industry has not answered some of the most basic customer hassles, like: I don’t want to deal with half a dozen agencies all asking to be separately paid, before I get my system working. First you sell me an empty PC, then you face me with a choice of operating software, then I have to find an Internet provider. Just as I am all set to start surfing, you tell me of the dire consequences of doing so – unless I buy a Net security product.
Being the ‘chip’ guy , Intel, unsurprisingly thinks, silicon is the best place to anchor this multi-dimensional wish list: Embedded systems allow small chunks of software to sit inside the hardware, rather than having to load from a storage device like a hard drive or a Flash memory device. So Intel went and bought out a leader in embedded solutions, Wind River, just over a year ago. As personal appliances become smaller, more portable, operating systems will come embedded in the hardware – it should have happened a long time ago ( after all Read Only Memory (ROM) devices have been available as long as the PC has been around – and could well have served the role that embedded systems are playing now). But between them, the hardware and software rajas – Intel and Microsoft seemingly decided to ‘ live and let live’ – each feeding the other and both growing fat in the process, while we the customers, paid for hardware and software separately, again and again and again, every time the makers chose to update and render our platforms obsolete. 
Well, maybe, not much longer.
See Intel chief Paul Otellini’s comment when announcing the intent to buy McAfee: "We have concluded that security has now become the third pillar of computing, joining energy-efficient performance and Internet connectivity, in importance….We believe that security will be most effective when enabled in hardware”. And McAfee CEO David DeWalt added: Tackling next-generation cyber security is a key reason and motivation for Intel and McAfee to join forces”.
Hardware-enhanced software – that’s the new name of the game, at Intel.
This is the thin end of the wedge, the hardware camel, edging into the software tent: Intel has no hardware platform for the booming mobile market where phones outsell PCs 5 to 1. Bundling McAfee security into its processor silicon is the first step. The next is to do likewise with ‘lite’ operating software – like Google’s Android or Nokia’s Symbian – and then lo and behold! Intel will have the agni asthra, the secret weapon, to take on the mobile market, ‘chipping’ in with a silicon solution that is hardware, software and security all rolled into one. At this point in time, that seems to be the game plan, whose first move is the tight hardware embrace of Intel and McAfee.

Other industry comments:

IDC India comment: Kapil Dev Singh, Strategic Business Advisor:
The Acquisition of McAfee appears to be a symbolic move by Intel to position itself strongly in the fast emerging non-PC devices running on a chip. And what could be a better statement than security. That said, the acquisition seems to be more of a futuristic move as mobile non-PC devices, automobile gadgets, and consumer electronics products hardly face security threats of the kind and order faced by PCs. And this is hardly a key criterion for justifying the current move.

Depending on how security threats emerge in the non-PC device segment, the rationale of this deal will become clear over a period of time.

However, from the limited details it raises some important questions like (a) Is the acquisition worth developing a position, whose time is yet to come?, (b) Does it indicate the failure of Intel’s attempts at developing embedded software in-house, a strategic stance adopted some years ago? and (c) If the acquisition is to create an embedded security software offering, what is distinct competitive advantage in the short run? This objective could have been better met through a joint development.

Looking at all the perspectives, the deal rationale is not quite clear, at least in today’s context.


OVUM COMMENT: Graham Titterington, Principal Analyst
The active involvement of a company with the influence and resources of Intel in the information security arena will have a major impact on the future of computing
McAfee's products extend beyond IT security into governance and aspects of systems management, and so this acquisition will increase Intel's exposure to the CxO level executives in the world's largest organisations.
Many major IT vendors have been buying IT security vendors for several years, such as IBM, HP, Microsoft, and EMC. The difference is that Intel is thought of as a hardware vendor enjoying a near monopoly in its core markets (although it is also a large software supplier as well). We can assume that Intel's objective is to incorporate more security features into its chips. For users, and for businesses, this will be welcome, but clearly there is a risk of monopolistic concerns damaging the market. The situation brings echoes of what we saw in 2002 when Microsoft, in conjunction with Intel, proposed a secure computing platform under the auspices of the Trusted Computing Platform Alliance, and Microsoft's Palladium project.
Competitive concerns largely stifled this vision which got scaled back to some encryption features that we see today in Windows 7. Effective security has to work at the platform, network, and business levels and a secure chip cannot address all of these by itself.

Intel-McAfee Fallout: Who Will Buy Symantec?
McAfee rival is now in play and will likely garner attention from a long list of possible suitors.
By Paul McDougall
InformationWeek August 20
http://www.informationweek.com/news/infrastructure/management/showArticle.jhtml?articleID=226800433&cid=nl_tw_networking_2010-08-20_h 

Aug 21 2010