Intel Sells Majority Stake in Cyber-Security Business

Private equity firm TPG will take a 51 percent stake and Intel will keep a 49 percent share in a security company that will adopt the McAfee name.  

Intel logo

Intel is spinning out its cyber-security software business in a partnership with private equity firm TPG—the latest move by the top-tier tech vendor to remake itself in an industry undergoing rapid change.

Intel officials said Sept. 7 that the chip maker and TPG will create a new, independent company based on its Intel Security unit in a deal worth about $4.2 billion, a far cry from the $7.6 billion Intel paid for the McAfee security software company in 2010. TPG will own 51 percent of the business and Intel 49 percent, and the private equity firm will put another $1.1 billion into the new company to help accelerate growth.

Chris Young, senior vice president and general manager of the Intel Security Group, will become CEO of the new company, which will adopt the McAfee name. Intel officials in 2014 pushed the McAfee brand into the background, renaming the business Intel Security.

The announcement confirmed the speculation over the last several months that Intel was interested in shedding the cyber-security software unit, which has been viewed as a disappointment for the chip maker since the acquisition six years ago. Intel officials at the time said buying a security software vendor would enable the company to build better security features into its processors and better protect PCs, servers and other systems from attack.

The security unit has done well financially. In the last quarter it generated $537 million in revenue, a 10 percent increase over the same period in 2015, and through the first half of the year, revenue grew 11 percent to $1.1 billion, officials said. Operating income hit $182 million—a 391 percent gain—and bookings increased 7 percent yearly between 2013 and 2015. Still, the business never followed through on the promise that company executives had hoped for. At the same time, under CEO Brian Krzanich, Intel executives over the past year have been working to restructure the company to address emerging markets including the internet of things (IoT), drones, virtual reality (VR) and the cloud, while at the same time growing the data center business and reducing its reliance on the contracting global PC space.

Part of the restructuring includes 12,000 job cuts.

In a letter posted on the Intel website, Young told customers that they "will benefit from a focused, agile and independent provider further committed to protecting you, recognizing that you require simplicity in your security environment as much as you do effectiveness. With McAfee, you will get a proven player with a leading portfolio—focusing on endpoint and cloud as security control points, combined with actionable threat intelligence, analytics and orchestration—allowing you to detect and respond to more threats and with fewer resources."

According to Young, the Intel Security Group protects more than 250 million endpoints, counts almost two-thirds of the world's largest 2,000 companies as customers, defends more than 200 million consumers and detects more than 400,000 new threats each day.

Group officials last year unveiled a strategy shift in which the company was moving away from selling point security products and instead would focus on building out a platform approach that would better address that changing threat landscape. Officials got rid of some technologies—including mobile device management, firewalls and email—enhanced others and created new products such as the Data Exchange Layer (DXL), which enables instant communication and collaboration among disparate security technologies from multiple vendors, and Endpoint Security 10, for device security.