Source: The Wall Street Journal Asia                               Date: 25 August, 2010

Intel Corp. has agreed to buy security-software specialist McAfee Inc. for USD7.68 billion, a surprise transaction designed to jump-start the chip giant's uphill effort to move its technology beyond computers. The deal, the largest in Intel's 42-year history, sent off shock waves on Wall Street and in Silicon Valley because of a lofty 60% premium and worries that Intel is moving far beyond its expertise in designing computer chips.

Some industry observers said Intel could face concerns that the combination could hurt McAfee's competitors in antivirus software. The move comes just two weeks after Intel settled an antitrust probe by U.S. regulators over the company's dealings with computer makers. But Intel executives argued growing security dangers require new measures, describing the acquisition as an essential step to design chips and other hardware that can protect systems better than software alone.

While antivirus software from McAfee, Symantec Corp. and others have slowed the spread of such rogue programs, computer systems run by companies and government agencies face thousands of attacks every day. Meanwhile, products such as smartphones and Internet-connected TVs have been slow to adopt comparable security measures—and potential weaknesses could multiply as Internet connections are added to new devices, including home appliances, office equipment and industrial machines.

The pact is another sign of consolidation that is reshaping the technology landscape. Cash-rich tech giants are using acquisitions to push into faster-growing markets, in some cases moving out of their strongholds to create new combinations of hardware and software.