Intel Gets EU Approval for McAfee Deal

European regulators say their approval is conditional upon Intel following through on promises to ensure a level playing field for McAfee rivals in the software security space.

Intel received the European Union's approval for its $7.68 billion acquisition of security software vendor McAfee after alleviating regulator fears that the deal would create an unfair competitive advantage over McAfee rivals.

In a statement Jan. 26, the European Commission-the antitrust arm of the EU-said the concessions made by Intel should ensure fair competition in the marketplace, and that the approval of the deal was conditional on Intel following through on those concessions.

"The commitments submitted by Intel strike the right balance, as they allow preserving both competition and the beneficial effects of the merger. These changes will ensure that vigorous competition is maintained and that consumers get the best result in terms of price, choice and quality of the IT security products," Joaquin Almunia, the commission vice president in charge of competition, said in the statement.

Intel expects the deal to close during the current quarter.

Intel officials announced in August 2010 their intent to buy McAfee, which is second behind Symantec among the world's largest security software makers. Intel is working hard to move beyond its core PC and server processor businesses into new and fast-growing markets, including smartphones, tablet PCs and embedded devices. With such highly connected devices, security is a key issue, and Intel officials see the ability to integrate security capabilities onto the chips as an advantage in their looming competition with the likes of Qualcomm, Samsung and Texas Instruments.

Those companies build chips based on designs from ARM Holdings, which currently are found in most smartphones and tablets.

The U.S. Federal Trade Commission gave its approval to the deal in December 2010, but European regulators had more concerns. The EC-and McAfee rivals-worried that if Intel were to tightly embed the McAfee technology onto its chips and chip sets, it could put other security software vendors at a significant disadvantage, considering Intel's dominance in the industry. Intel owns more than 80 percent of the global processor market.

This was less an issue of overlapping products, and more about the overall impact of having two such major tech companies merging their businesses, the EC said. There was a concern that offerings from Symantec and other vendors would not work as well with Intel products if they were embedded with McAfee technology. In addition, the regulators worried about what would happen to the competitive balance in the market if McAfee products no longer worked with products from Intel rivals, such as Advanced Micro Devices.

A similar concern was raised last year by several rivals and regulatory bodies, which accused Intel of at one time altering some components-such as compilers-so that they would not work as well with non-Intel products. Intel has faced a number of lawsuits over its business practices, and while the company has settled most of them, company executives have denied their practices were unfair or violated any antitrust laws.

To allay those concerns, Intel agreed to ensure that other security software makers will be able to run their products on its chips and chip sets in the same way that McAfee will. Intel officials also said they will not do anything to impede those security solutions from running on their products, and will not hinder the performance of McAfee products when running on systems powered by non-Intel processors.

Intel plans to run McAfee as a separate business, and McAfee will continue selling its products to third parties.

Intel's efforts to expand its reach into the mobile device world are being driven not only through internal efforts-such as with its Atom processor platform-but also through acquisitions such as the McAfee deal and Intel's proposed $1.4 billion purchase of Infineon's wireless business.

In a research note issues Jan. 26, analysts at Deutsche Bank said they expect Intel to now shift its focus from acquisitions to execution.

"We believe Intel is now finished with large acquisitions and will shift focus to executing a product roadmap with McAfee," the analysts said in the note, adding that "Intel has been collaborating with McAfee for 18 months and expects to launch the first products from the collaboration in early 2011."