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Intel to raise $3.1bn by spinning off security business

Ending what many saw as an uncomfortable marriage, Intel is to spin off its security business as a standalone pure-play cyber security company

Chip maker Intel is partnering with global investment firm TPG to spin off its security business to form the one of the world’s largest dedicated information security firms, valued at $4.2bn.

Intel will receive $3.1bn in cash and retain a 49% stake in the new business, to be known as McAfee and led by Intel Security chief Chris Young and his existing management team.

The move comes five years after Intel completed its $7.7bn acquisition of McAfee and just two years after rebranding it as Intel Security.

Intel justified the acquisition by outlining plans to push security to every device through building a baseline security capability into every chip.

But those plans have not come to fruition, and some of the key executives at Intel who led the acquisition and championed the concept of hardware-based security have since left the company.

Intel has also since been forced to restructure to focus on datacentres for the cloud industry and mobile and wearable technology in the face of the global slowdown in PC shipments.

In Intel’s 2016 first-quarter financial results, the security group was one of its best performers, with revenue of $537m, up 5% on the previous quarter and up 12% year-over-year.

This made the division ripe for selling, and the deal with TPG will give Intel a financial boost, in addition to the $750m it is seeking to save in 2016 by cutting 12,000 jobs.

Read more about Intel

TPG announced it is making a $1.1bn equity investment in the business to help drive growth and enhance focus as a standalone business.

In a statement, Intel and TPG said they would work together to position McAfee as a strong independent company with access to significant financial, operational and technology resources.

“With the new investment from TPG and continued strategic backing of Intel, the new entity is expected to capitalise on significant global growth opportunities through greater focus and targeted investment,” the statement said.

In 2015, Intel Security unveiled a new strategy focused on endpoint devices and cloud as security control points, as well as actionable threat intelligence, analytics and orchestration, which the company said would enable customers to detect and respond to more threats faster and with fewer resources.

“Security remains important in everything we do at Intel”
Brian Krzanich, Intel

“Security remains important in everything we do at Intel, and going forward we will continue to integrate industry-leading security and privacy capabilities in our products from the cloud to billions of smart, connected computing devices,” said Intel CEO Brian Krzanich. 

“As we collaborate with TPG to establish McAfee as an independent company, we will also share in the future success of the business and in the market demand for top-flight security solutions, creating long-term value for McAfee’s customers, partners and employees and Intel’s shareholders. Intel will continue our collaboration with McAfee as we offer safe and secure products to our customers.”

Jim Coulter, co-founder and co-CEO of TPG, said he was confident McAfee would thrive as an independent company.

“With TPG’s investment and continued support from Intel, McAfee will sharpen its focus and become even more agile in its response to today’s rapidly evolving security sector”
Jim Coulter, TPG

“With TPG’s investment and continued support from Intel, McAfee will sharpen its focus and become even more agile in its response to today’s rapidly evolving security sector,” he said.

The CEO of the new company, Chris Young, said in an open letter that as a company supported by these two partners, McAfee will be in a position of strength.

“With this move, we will create the ideal company structure to position McAfee for enhanced focus, innovation and growth,” he said.

The transaction is expected to close in the second quarter of 2017, subject to certain regulatory approvals and customary closing conditions.

Read more on Hackers and cybercrime prevention

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