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Intel Spins out Security Group

SAN JOSE, Calif. ¡ˇěC Intel Corp. will sell 51% of its security group to a private equity company for $3.1 billion in cash, spinning it off as an independent company to be called McAfee. Under former chief executive Paul Otellini, the x86 giant bought McAfee in 2010 for $7.68 billion.

Intel will retain 49% ownership of the new company in a transaction valuing the business at $4.2 billion. In a written statement, Intel called the new company ¡¡ãone of the world¡¡¥s largest cybersecurity companies.¡¡À

An estimated 7,500 McAfee employees will leave Intel at the close of transaction, expected in the second quarter of 2017. The move follows a broader reorg announced in April in which Intel said it is laying off 12,000 workers.

In a research note, Deutsche Bank analyst Ross Seymore forecast the group would earn $2.2 billion this year with an operating margin of 17%. Overall, represents about 4% of Intel¡¡¥s revenues and 2% of its operating profits, he said.

¡¡ãWhile taking a sizable loss is sub-optimal, we nonetheless applaud the company¡¡¥s increasing focus on its core competencies and its efforts to become more efficient,¡¡À wrote Seymore. ¡¡ãWe view this divestiture as consistent with CEO Brian Krzanich¡¡¥s increasing focus on Intel¡¡¥s core areas¡¡À such as the data center, the Internet of Things and non-volatile memory, he added.

After a reorg last year, the group grew revenue 11% to $1.1 billion and operating income by 391% to $182 million in the first half of this year. In 2015, the group reported revenues of $2 billion and an operating margin of 11%.

Chris Young, the general manager of the Intel group, will become the independent company¡¡¥s chief executive. ¡¡ãWe will continue to focus on solving the unique demands of customers in the dynamic cybersecurity marketplace, drive innovation that anticipates future market needs, and continue to grow through our strategic priorities,¡¡À Young said in a statement.

¡a Rick Merritt, Silicon Valley Bureau Chief, EE Times

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