Intel Embraces Security, Ignores Search
August 23, 2010
The pundits and azurini have been happier than a Poland China in a mud puddle. Intel spent $7 billion for McAfee. You can read many analyses of this deal. These include the Business Week “Intel Does Security, US Broadband Not So Fast” and the San Jose Mercury News’s “McAfee Deal Stirs Speculation about Symantec.” Leo LaPorte’s network tackled the subject in a breezy way. I lost track of the number of blog posts that choked my feedreader. In a lousy economy like ours, any big deal is a great deal for those who made it happen. After the commissions are paid, I am not so sure about the upside for Intel.
Let’s step back. McAfee has an interesting past. Recently the company’s update killed XP machines. The price tag seems lofty. There are some cultural differences between the two companies. These range from where money comes from to the markets served. But deal hungry MBAs can concoct some weird and potent bar drinks in today’s less than exciting financial environment.
Intel has many interests but chief among them is generating lots of revenue. The world of expensive silicon is an extremely hostile place. One can imagine the owner of a delivery company in Peanut, California, trying to keep an outfit like Intel humming like a nuclear submarine’s reactor. The skills required are many and varied. Intel is now taking on another country’s fleet. Some nuclear powered, some coal fired, and others wind powered.
In 1999 or 2000, I can’t remember the exact year, I brushed against a project that included an analysis of Intel. At that time, Intel was thinking about what to do with the spare cycles on its future chips. CPUs, particularly the dudes with the skyscraper architecture and multiple cores, have more zoom than the software can exploit. One of the ideas the research project explored was putting content processing or information retrieval functions in silicon. I remember kicking around ideas for various types of on-the-fly processing and even combining online, offline, and near line functions to make it easy for an employee to locate needed information. Great fun, just an above average complexity type of problem.
In the last decade, Intel has nosed into a wide range of businesses. You can get a partial run down in the Wikipedia article “Intel Corporation.” Omitted from the Wikipedia write up was Intel’s experiment with Convera to put search and retrieval in data centers. I have documented some of the features of this interesting move in the first edition of my Enterprise Search Report (2003-2004, now out of print). Here’s the highlight: The effort failed and burned a big pile of greenbacks. Also omitted from the Wikipedia write up was Intel’s stake in Endeca. This amounted to a smaller pile of greenbacks than the Convera adventure, but nothing really came of that step either.
Based on my nosing around, these probes into search were part of Intel’s quest to find something really hot to slap into “little silicon” (a CPU type thing or a small box gizmo) or into “big silicon” (a data center type of thing). Either big or little, Intel would be able to offer more value-added functions and, so the theory goes, charge more. The object of the game is to make money, remember?
The closest companies have come to putting search into silicon is an appliance. A good example is the Exegy appliance. This device combines proprietary hardware and firmware with off-the-shelf parts. Putting an entire Exegy system on a single piece of silicon is a good idea, just a difficult one to deliver. Other companies nosing down this path of embedding content processing on a tiny sliver of goodness include Cisco, Juniper, and those fun loving Googlers. Maybe some day, just not today.
Intel’s purchase of McAfee is not a random act. After the blind alleys of search and other value-added functions, Intel’s wizards have concluded that security is the play. The decision makes some sense in the context of the “big silicon” and “little silicon” view of value adding. Today, Intel can put McAfee’s services in Intel’s “big silicon”; that is, data centers, cloud services, or special purpose servers. Tomorrow, Intel can try to put McAfee’s services in “little silicon”; that is, home gizmos like mobile phone chips or at some point in the future, in a hybrid of silicon and cloud services. For a company in search of revenues, security may be an easier path than search. After a decade of probing into search, Intel seems to have fallen in love with the security angle.
Will this work for Intel?
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An addled goose is certainly no predictor of the success of giant corporations who have a track record of manufacturing CPUs that overheat, make math errors, and cannot be easily distinguished except by trial and error. My take is:
- Intel will make a heroic effort to use McAfee’s service to generate lots of revenue. With $7 billion as the starting point for measuring success, I expect considerable energy expended on the McAfee deal. This is a big number even for an Intel, and I think that there will be some friction for Intel pushing forward. A goof means a shake up at Intel. A big shake up.
- Intel will try its best to tap into the McAfee business model of recurring revenue from services. The fly in the ointment is that other folks are in this business as well. Amazon could buy ESET or Panda and give Intel’s strategists some extra inputs to analyze. I don’t think an Amazon, Rackspace, or even a Google would have to spend $7 billion to offer cloud, mobile, or value-added services to their customer base.
- Intel will have to demonstrate that it can manage a different business. Making life tough for AMD and wooing Apple are one type of management skill, running an outfit like McAfee is another. Is Intel’s management team up to the task? Shareholders will know in a year, maybe less.
To wrap up, can value adds be slammed into big or little silicon? Sure—to some degree. Will people pay for these value adds? A percentage will, but many people won’t know what a “value add” is. When I buy a toaster, I don’t think too much about what’s inside. I think about features, most of which mean nothing to me as a consumer. I want toast my way. Period. As the high tech market becomes more commoditized, features will be included and bundled in one package. Perhaps enterprise buyers will get excited about McAfee functions, but Microsoft offers cloud security, and I haven’t heard the cheers here in Harrod’s Creek. Think of the iPad as the pivot point in personal computers. Think of the mobile phone as the pivot point in communications. Intel is a bulk supplier of parts. Now it has to learn some new tricks that generate copious amounts of revenue with an acceptable margin. Growth. Profit. Fast.
Can the older Intel dogs learn? If the Convera effort is an indicator, my guess would be, “This is a difficult shot. Doable on the History Channel’s Top Shot. In the rough and tumble world of technology marketing? A very difficult undertaking. Luck works, however.”
Stephen E Arnold, August 23, 2010
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