Semiconductor giant Intel (
) is paying a handsome premium to acquire McAfee (
), 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 (
) by integrating McAfee's security software in its microprocessors
We estimate that McAfee's security business could yield a 3%
the $24.30 Trefis stock price estimate for
. 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.