Intel's acquisition of McAfee won't affect Indian security market

The acquisition of McAfee, a security product and solution provider, by chip maker Intel has surprised industry watchers in India. Analysts opine it will not affect the position and market share of market leader Symantec.

According to research firm IDC, the top three security solution vendors in India in 2009 were Symantec, McAfee and Checkpoint.

“Intel’s acquisition of McAfee is more of a symbolic gesture that provides the chip maker an entry into the non-PC market. We do not see any significant impact of this move, at least in the short to medium term. I do not think this will impact Symantec in any way at this point of time. Since Intel has stated that it will run McAfee as a subsidiary, it is expected to continue to run its business in India on current lines,” said Kapil Dev Singh, strategic business advisor, IDC India.

According to IDC worldwide taxonomy, the security software market is comprised of four functional markets — identity and access management (IAM), secure content and threat management (SCM), security and vulnerability management, and other security software. The total size of the Indian Security Software market in 2009 was around $100 million (around Rs 465 crore). The market grew at a compounded annual growth rate (CAGR) of 11 per cent in 2007-2009.

Singh pointed out that while the idea behind the acquisition seemed to be developing security software that could be embedded into the chip, the timing raised questions about Intel’s services strategy.

Industry experts believe that in the PC market, the acquisition will not make any big difference. “If you look at both Intel and McAfee, they work with OEMs. Intel works with Dell, IBM, HP and others, and similarly, McAfee’s products too are embedded in products of these firms. So, it certainly does not make any difference. This will only make difference in the non-PC market where chips get embedded in software,” said a senior executive of a multi-national security company in India. Both have significant presence in India. Intel started its operations in India in 1988, by setting up Intel India Development Centre. The centre at the end of 2009 had a headcount of 2,500 and contributes significantly to most of Intel’s critical product and platforms. Intel has so far invested $2 billion in India.

McAfee too has a research and development centre in India that has 1,300 engineers. “What might just work for McAfee is the R&D that Intel has. With McAfee’s products, Intel’s development team could just get best of the products out,” said an analyst. India is the third-largest market for McAfee in the Apac (Asia-Pacific) region, the first being Australia and New Zealand, followed by South-East Asia. The India business contributes about 15 per cent to McAfee’s Apac revenues of about $140 million (around Rs 652 crore).

Analysts hope Intel will keep McAfee as a stand-alone company and not integrate it. “Given the risks associated with this deal, enterprise customers should be wary of making long-term commitments to McAfee until Intel’s intentions are clear. It would be best if McAfee was left to manage itself, largely as a stand-alone company. Most enterprises take the least-common-denominator approach to manage their computing assets. This is largely because refresh cycles cause hardware platforms to stick around much longer than software-based ones: it is easier to push down a software update than to pull a motherboard. I am not convinced that a hardware-based strategy for security will resonate with enterprise buyers,” said Andrew Jaquith, senior analyst, Forrester Research.