While the decision by Intel to buy McAfee (news, site)  may have raised some eyebrows, the agreement to pay US$ 7.68 billion for it  is causing absolute consternation, especially on Wall Street where such deals are pulled apart like fresh donuts.

There is the fact that McAfee is a very healthy company with gross margins running at about 80% at the moment, but still the price seems a bit elevated especially if Intel (news, site)  could buy any of the licensing it needed if it was just a question of adding security to its chips.

However, with the dust beginning to settle, the general consensus is that Intel is not buying McAfee for security threats that exist already – although that itself is a lucrative market with McAfee generating around US$ 2 billion in revenue in 2009 with over 6000 employees.

The current thinking is that this is about buying a stake in the mobile market and, in particular, smartphones, by providing security at chip level for threats that have yet to appear.

Why McAfee?

Speaking during a conference call after Intel made the announcement, Renee James, who is likely to be managing McAfee as a subsidiary of Intel’s Software and Services group, acknowledged as much saying that the deal corresponded with Intel’s long-term strategy for the move to wireless mobility.

She added that Intel would be using current McAfee products to enhance Intel’s technologies and that the first combined products could be announced as early as next year.

While some commentators are doubting that Intel will be able to sell the concept of mobile security to the business community and the public before any such threats have been detected, with many mobile users looking to manage their content remotely it would be a real game of Russian Roulette with business information to assume that it is going to be secure on smartphones.

Securing Information

And this appears to be what Intel's Chief Executive Officer Paul Otellini is betting on. In the first half of the year, he said McAfee had added more than 10 million new malware variations to its database of security threats. Is it reasonable to think that smartphones are immune once the market is fully developed?

One other element of the acquisition that is worth noting and runs in parallel to developments with other industry players who are also conscious of the growing need for better security.

Otellini indicated that the McAfee security elements that Intel would be using in their chips would be built into them from the ground up. They work faster and better and don’t have to go through other programs making it harder for potential hackers to attack, he said.

Building Robust Security

And Intel is not the only company thinking this way. Just this week HP (news, site)  announced the acquisition of security assurance vendor Fortify for an undisclosed price, although it was probably a good deal less than McAfee’s US$ 7.7 billion.

The deal was no real surprise as they have collaborated before on a number of projects. With Fortify, HP will add enterprise application security programs from the ground up rather than adding them as an afterthought and in doing so create far more robust security systems across their portfolio.

In short, it means that using Fortis security can be added from the ground up and into the blueprints of the application from the very start.

McAfee-enabled Intel chips will be available as of the first half of next year. Remains to be seen what security threats have emerged in the smartphone space by then and whether users are prepared to pay to protect their mobile content.