Report: Intel McAfee Deal May Face EC Probe

Intel’s deal to buy security software maker McAfee could face delays due to concerns from the European Commission about how the acquisition might affect competition in the security software market, according to a Wall Street Journal report published on Friday.

The Commission has “privately expressed concerns” during its preliminary review of the deal, according to the report, which cites unspecified people familiar with the matter.

Phase two investigation possible

These concerns could lead the Commission to launch a longer “phase two” investigation, which could either result in the deal ultimately being blocked, or, more likely, in specific competition guarantees being made by Intel as a condition to win the Commission’s approval, according to the Journal.

Intel formally notified the Commission of its intention to buy McAfee for $7.68 billion (£4.94bn) in late November, and since then the regulator has circulated questionnaires soliciting the views of other security software firms, according to the Journal’s sources.

The Commission’s deadline for responding to the acquisition plans is 12 January, at which time it may either approve the deal or launch a longer investigation. Intel may offer remedies, and the Commission may either accept these and approve the deal or continue with the phase-two probe.

The sources said the Commission has focused on Intel’s desire to incorporate security features into its processors, and whether McAfee could have priveleged access to those features.

The Commission’s questionnaires include questions about how Intel could embed security features into its processors and whether these could be reserved to work with McAfee software, according to the report. They ask whether Intel could use McAfee’s software to determine which applications are allowed to run on Intel’s chips and whether the chips could make McAfee’s software run more efficiently than that of competitors.

The questionnaire also poses questions about the possibility of using “sleeper agent” software to launch promotional advertisements for McAfee software, the report said.

Strategy questioned

Intel declined to comment on the Journal’s report. The company has said it will discuss its product plans at a future date.

“We believe the combination of Intel and McAfee will prove important in achieving breakthrough innovations in security and look forward to discussing in more detail our product plans and strategies after the transaction is closed,” said Intel vice president of investor relations Kevin Sellers in a recent statement.

Some industry observers have questioned the logic of the McAfee acquisition since it was announced in August.

“If you view today’s security aftermarket as something that ought to be better left in the ashbin of history, where security is baked into operating systems, this deal is more of a head-scratcher,” said Forrester Research analyst Andrew Jaquith at the time. “In that light, Intel’s purchase of McAfee is a lot like a horseless-carriage vendor buying a leading supplier of buggy-whips.”

Others have argued that the acquisition would give Intel the ability to add security features directly into the hardware for network-connected devices such as printers and security systems that currently don’t run security software.