The tech industry is going through a serious consolidation phase, and Intel is one of the leaders of the ongoing buying spree. Intel purchased the wireless unit of Infineon this week, after recently spending nearly $8 billion to buy the McAfee. The moves don’t make sense at first glance, but in an era of commoditized PCs and decreasing profit margins Intel has to look for alternate revenue streams.
Richard Stiennon, an analyst with IT-Harvest, appreciates the move by Intel to acquire Infineon’s wireless unit, but is still perplexed by the McAfee purchase. “The Infineon purchase fits into a vision of catching the next wave of mobile devices. Unfortunately, the McAfee acquisition (if Intel’s stockholders approve) is way out in left field. McAfee is a hardware appliance vendor as well as an AV software company. Buying one of your many customers (on the appliance side) usually has disruptive results as competitors (Cisco, Juniper, Check Point, Fortinet) look for other resources. If Intel has some sort of plan to bake content processing into chips they could have acquired the expertise a lot more cheaply. There are a couple of dozen great AV companies that could probably be bought for less than $200 million.”
The grand vision behind the McAfee acquisition may not yet be clear, but one thing is apparent–the world of x86 processors is increasingly competitive, with lower margins, and Intel has to diversify in order to remain profitable. Technology is evolving to be smaller and more mobile, and Intel needs to move proactively to transition or risk being left behind.
Rob Shein, an Information Warfare Architect for HP, explains “Simply put, the x86-instruction-set-based processor world is commoditized beyond belief. And the only place for innovation (due to the need for backwards software compatibility) is in performance…but the market expects that performance jump every so often, so Intel and AMD have to keep cranking away just to keep up with expectations. Instead of the trumpeted periodic achievement it once was, Moore’s Law has become an albatross around the neck of those who now must sustain it.”
What remains to be seen is whether or not Intel is done shopping, and how Intel will strategically integrate its new acquisitions. Stiennon points out “It appears that Intel is on a path to becoming a holding company á la GE or ITT,” adding “HP, Dell, and IBM should be watching closely as Intel makes a move to become a bigger player in the IT space. If it makes a big purchase of a services firm its strategy will become clear!”
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