McAfee Deal Could Lift Intel's Stock by 3%


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Semiconductor giant Intel ( INTC ) is paying a handsome premium to acquire McAfee ( MFE ), 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 AMD ( AMD ) by integrating McAfee's security software in its microprocessors and chipsets.

We estimate that McAfee's security business could yield a 3% upside too 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 the proliferation of 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks , US Markets
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