Will Intel Offload Its McAfee Cyber Security Division?

Chip giant Intel Corporation (NASDAQ:INTC) is reportedly considering the sale of Intel Security, its cyber security unit.

Last Sunday, a Financial Times report indicated that a consortium of private equity firms may purchase the division at a price close to or even higher than what Intel had originally paid.

Formerly known as McAfee, Intel acquired this antivirus software maker back in 2010 with a view to secure its chips and improve their threat detection power with McAfee’s security functionality.

Even after six years of its acquisition by Intel, the division hasn’t shown any spectacular result. The original plan to embed McAfee’s cyber security technology in chips is still incomplete. The unit hasn’t been able to contribute significantly to Intel’s revenues.

Moreover, the security space has become increasingly competitive. Startups are quickly strengthening their foothold through venture backups or getting acquired by big players.

McAfee has to compete in a number of areas such as network, risk management, end point and data security. It appears that Intel is not ready to face this rising level of competition especially at a time when its core chip business is struggling due to a continuous decline in PCs.

The secular decline in the PC market and Intel’s inability to grab a bite of the growth in mobile also made the acquisition a bad fit. The fact that Intel rebranded McAfee as Intel Security probably didn’t help either.

We also can’t forget that Intel recently announced a huge restructuring plan that included 12,000 job cuts with the rationale for the action being to defocus the PC business.

It therefore appears that Intel intends to redirect its resources into areas with better growth prospects, such as the data center, memory and Internet of Things (IoT) businesses.

At present, Intel has a Zacks Rank #2 (Buy). Other stocks worth considering in the broader technology sector are Blue Calypso, Inc. (OTC:BCYP) , Internap Corporation (NASDAQ:INAP) and Yirendai Ltd. (NYSE:YRD) , each carrying the same Zacks Rank as Intel.