As has been widely reported, Intel is planning to spin off its Intel Security business unit formerly and soon again to be known as McAfee. The spin-off will be a private company valued at approximately $4.2B, of which 49% will be held by Intel and 51% by asset management firm TPG. A press release detailing the terms of the deal is here.

Here’s our view on a few ways the spin-off might impact the market for IoT and embedded security:

• Will Intel retain any security assets internally? Intel had security researchers and business predating its acquisition of McAfee (mostly related to Trusted Platform Modules and Trusted Execution Technology), so those assets are likely to remain within Intel.
  
  
• Will the spin-off reduce Intel’s commitments to security for IoT? Probably not. Indeed Intel, as a significant owner of the new business, will have a vested interest in maintaining existing projects underway with McAfee for chip-level and other IoT-capable security solutions, such as data encryption, device management, data loss prevention, and threat intelligence. However, it remains to be seen whether Intel will resell the new McAfee solutions and derive top-line revenue. If not, security may fade from Intel’s priority.
  
  
• Will the spin-off increase McAfee’s efforts in security for IoT? This question gets at the crux of the matter. In 2015, Intel Security had revenue of $1.75B, a decline of approximately 4% from the prior year. Intel did not publicly disclose what portion of revenue was accounted for by IoT-related business. (Because of the way in which IoT systems are often interwoven with conventional IT systems, separating revenue for them is not straightforward.) The declining market for consumer PC anti-virus software—where highly effective free options are now readily available—means that McAfee will increase its focus on enterprise and commercial security solutions. As more and more businesses integrate IoT systems into their operations, it is inevitable that they will seek out IoT security solutions, and it is inevitable that McAfee will further develop and provide such solutions. Will McAfee do so any faster as an independent company than it would have done within Intel? In the short term, no, because we expect the company’s emphasis to be more on immediate revenue generation than research and development. But in the mid-term, as IoT systems ramp up worldwide, the independent company will be better positioned to quickly pivot its product line deeper into IoT solutions. Bear in mind that the majority of embedded devices use processors based on ARM architecture, not Intel’s x86 architecture. McAfee could benefit by increasing its efforts to develop security solutions targeted at ARM-based systems.
  
  
• Will the spin-off enable McAfee to work with other chip vendors? In theory, yes, but in the near term, the focus of McAfee’s efforts toward hardware security will be on Intel’s chips. Intel is still the world’s largest semiconductor maker. As a privately-held company, McAfee won’t be obligated to provide solutions to any other chip vendors, and those other vendors might remain wary of working with a supplier part-owned by Intel. However, in the long run it would be in the best interests of McAfee to diversify some of its customer base for semiconductor security solutions.

In summary, we believe the effect of the McAfee spin-off will be a slight net positive for IoT security. View the 2017 IoT & Embedded Technology Research Outline to learn more.