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Thursday, August 19, 2010

Intel buying McAfee

Been trying to come to terms with this deal all day. The few benefits are below...

1. They purchased the company for approx. $7.5B in CASH.

2. The purchase price gave McAfee a forward PE of 16.

This is very consistent with the acquisitions we have been seeing with cash rich companies. And a very strong signal that all management teams are selling their companies for very reasonable valuations. (The large % differences seen via the market is the large disconnect between investors and management opinion. I think the management teams of the multiple players buying are correct.)

As far as synergies go within the business, I am not that savvy within the semi space to know how having McAfee in house benefits them. If they can now make air-tight security features via the combination, that would be great. I do know McAfee's margins will help Intel's balance sheet.

Most importantly, the above still indicates the market is very very discounted.

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