(Cross-posted @ Cloud Computing)
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By Chirag Mehta on August 20, 2010
Today Intel announced that it is buying McAfee for $7.7 billion. This acquisition made people scratch their heads. Why McAfee?
The obvious arguments are that Intel has hit the growth wall and organic growth is not good enough to satisfy the shareholders. But this argument quickly falls apart from margin perspective. Why dilute their current nice gross margin even if McAfee has steady revenue stream?
I believe there are two reasons. The first is that the companies need a balanced product and revenue mix regardless of different margins. Oracle bought Sun and HP bought EDI. Big companies do this all the time. The second, not so obvious, reason is a recognition that software is new hardware. The processors are processors – they are a commodity any which way you look at them. It is not news to anyone that the computing has become commodity which is the basis of utility style cloud computing. Software, embedded or otherwise, has significant potential to sell value-added computing. The security solutions could fit in nicely on a piece of chip. When you drive a few miles from Intel’s headquarters to meet folks at nVidia you will be amazed to see what kind of value a software tool kit can derive from the processors.
I don’t know how Intel will execute the merger considering the fact that this is their largest acquisition ever. But, I am even more convinced that software is the new hardware. Cloud computing, data center automation, virtualization, network security, and a range of other technologies can leverage software in a chip that is optimized for a set of specialized tasks. Time to move from commodity to specialized computing until specialized computing becomes commodity. Interesting times!
Technology, Design, and Innovation strategist at the Office of the CEO, SAP, focusing on technology and architecture strategy and strategic operational, product, and management innovation. Adjunct faculty at Santa Clara University and San Jose State University with the department of computer engineering teaching graduate classes. Frequent speaker at conferences, special events, Chirag blogs at Cloud Computing.