While recent market action - the Intel acquisition of McAfee - rests a bit far afield from the storage focus behind InfoStor and this blog, the big question mark stamped on this acquisition by nearly every observer seems to beg for additional speculation, even as we press into the third day or so of post-acquisition news.
More than anything, this acquisition has caused some turmoil because a company well understood by a handful of analysts has suddenly sprung upon a company in a totally different space and perhaps only understood by an entirely different set of analysts and experts. That isn't to say Intel is solely processors (remember that LANDesk stuff and similar solutions sitting around in the dusty corners?) but it is a bit challenging for the blogo-analyst-sphere to finger the synergies.
The important thing to keep in mind about this acquisition, is that the acquirer (Intel) today, and likely forevermore, equals processors. An Intel acquisition of McAfee isn't likely about changing this, not for $7+B, and not for any other amount. Intel has long had fingers in other buckets, but their efforts in other spaces have only succeeded in so far as they can connect back to the processor business that really pays the bills. So the question that warrants some consideration is: how is McAfee about processors?
McAfee Pentiums - a war on two fronts, and looking for the secret weapon
Intel is increasingly forced to wage war on two fronts, they've used the bastion they originally built upon desktop compute to take major server market share, and by falling into it as desktop compute changed, they also gained significant footing in portable computing. But each of these two fronts is changing - the rate of evolution on both fronts is currently ramping at a phenomenal rate, and may well make an observer think that processing is one of the more difficult tech arenas to maintain dominance in.
The first front: Portable. Portable is transforming into lighterweight processing behind higher levels of mobility, and the lines between portable computing and mobile devices are becoming totally blurred. Nobody today can sit here in confidence and say on what type of computing device any average user is likely to do the majority of their computing in 5 years. Many folks out there think McAfee is about Intel getting better presence in the latest extension of portable compute, namely mobile. But it isn't - it is bigger than this. And it takes thinking about the second front to notice it.
The second front: Server. Even with Intel's current dominance of the server processor market, the future looks a little murky. Sure, they might maintain pure market share way into the future, but today Intel has both market share, and "presence" from branding and differentiation. But the maneuvers of other vendors are diluting Intel's presence. One problem will be stacks. Typifying the new combatants in this age of vendor acquisition and stack building is Oracle and the Stackman Mr. Ellison himself, but it shouldn't be overlooked that a number of other vendors have some troops on the field also. The threat is that in a world war being fought with stacks and virtualized workloads, the processor's footing becomes increasingly slippery. Vendors are likely motivated to increase workload mobility even across heterogeneous processor environments, and many have the tools to do so. Moreover, mobile systems will further incent everyone to increase workload portability. The individual processor is less important when scaling out, moving workloads, etc. Meanwhile, in the hypervisor-riddled data center, around every corner lurks a hypervisor capability that assumes or masks a capability that used to be associated with processors.
A less morbid analogy
The problem is, the king stands to be dethroned. The serfs are rising up, the parliament has taken control, and just like in 1794, the undercurrents (the FTC? State AGs?) have said a Reign of Terror is no longer acceptable. What's the processor king of the hill to do if he wants to stay the center of attention? The king better make his wares the new cultural capital of the kingdom, so he can maintain some power even among the shifting sands. In this case, it takes harnessing one of the king's precious assets - processor IP - and making it a visible, desired asset for the next generation data center.
Kings are good at security
If Intel is thinking right about this acquisition, one of their wares will be security. A compute infrastructure where security is fully integrated all the way into end-node processors could unleash some nearly revolutionary capabilities. But this security won't be McAfee's security, it will be Intel's security. McAfee will simply be one single channel through which next generation "Intel Inside" capabilities might be visibly delivered.
Intel has for ages dabbled in fielding security mechanisms at the processor layer - the latest being SSE instructions for full AES support in the processor. The problem is, that these innovations are within the processor core, and aren't leveraged above the operating system. The challenge is, Intel could likely never shake up the security market enough to explore opportunities to integrate such mechanisms above the operating system, among the security tools and frameworks used across enterprises. After all, the multi-billion dollar security industry is pretty fat, happy, and busily pre-occupied in their current businesses revolving around anti-virus, intrusion detection, data loss, and more. If Intel plans to harness security to rise above the OS, and gain greater relevance in the infrastructure, they might innovate deeply and then standardize all the mechanisms they want, but they'll likely never get reciprocal innovation nor significant integration from existing security vendors. But if a combined Intel/McAfee delivers a secure infrastructure that harnesses unique processor capabilities, other vendors will have to pay attention. Meanwhile, if Intel plays nice, and opens up opportunities for integration, they've just opened a door upon a whole new dimension of processor differentiation, where they can extract a whole new line of revenue from partners. Moreover, while McAfee business will be competitive with the business of many current Intel customers, Intel-security may have a net positive impact on each one of Intel's customer's ability to spur new hardware sales, augment their own management frameworks, and deliver next generation solutions. Despite the competition, there's a serious win here for Intel if executed right.
For a vendor already integrating bridges and graphics on die, taking steps to provide core security functionality that can be integrated with, and harnessed by, bigger security frameworks looks like a no-brainer. Moreover, this brings the processor to center stage. What Intel needs, is somebody willing to kick this innovation into the marketplace through integration with a popular security framework. Enter McAfee. Some claim this is about getting into mobile. It isn't. It is many times bigger than that. Intel wants to convert "security" into a channel through which to maintain market dominance. Get it? If you're a vendor, you should. Times are changing. If you're a financial analyst, how to do value McAfee as a channel for a chip company?
Will somebody buy Symantec to counter Intel's move? No, not to counter Intel's move. Despite some identity problems over a good number of recent years, I think we're on the cusp of a new Symantec, and even if there was another Intel-like opportunity out there, Symantec is no McAfee. Symantec today has broad capabilities in heterogeneous infrastructure integration - I think we are in fact not too far from the day when we'll think of them as a massive information virtualization vendor. Such broad capabilities could do the right acquirer some tremendous good (please Larry, don't break my heart, just say no...), but take a note, and check this prediction in a couple of years: Any other security-centric company acquisition, including Symantec, won't be put to work for the same ends for which Intel just acquired McAfee.
Frankly, I think this acquisition is but one bellweather telling those who are listening that we are entering a major technology marketplace disruption, one that really started about 6 months ago. This time, the disruption may seriously shift the fundamentals behind the market, and have far greater and lasting impact than smaller events like the 2000 tech bubble. I think few have observed this yet, at least not with an eye on how they should be changing their business execution in response. I think we just saw Intel get this. Time will tell.
Sr. Analyst / Taneja Group
posted by: Jeff Boles