Intel Corporation President and CEO Paul S. Otellini walks off the stage following his keynote address at the Oracle OpenWorld conference in San Francisco. Trefis says Intel may have a difficult time justifying the premium paid for McAfee.
In order to justify a price of $48 a share, McAfee needs to boost its corporate security market share to 26 percent and its consumer security market share to 36 percent by 2016, Trefis said.
On Aug 19, Intel Corp. said it is buying McAfee Inc. for $48 per share in cash, in a deal that will augment the chip giant's security portfolio.
At $48 a share, Intel is paying about 19 times earnings for McAfee and 4 times book value. Following the deal, McAfee's shares surged to $47 from about $30. The Trefis price estimate for McAfee's stock is only around $32.
On Aug 19, Intel Corp. said it is buying McAfee Inc. for $48 per share in cash, in a deal that will augment the chip giant's security portfolio.
At $48 a share, Intel is paying about 19 times earnings for McAfee and 4 times book value. Following the deal, McAfee's shares surged to $47 from about $30. The Trefis price estimate for McAfee's stock is only around $32.
"Based on McAfee's fundamentals, we think Intel overpaid. However, we could be proved wrong if McAfee manages to dramatically boost its shares of the corporate and consumer security software markets over the next few years," Trefis said.
Business Market
For the business market, McAfee offers anti-virus, anti-spyware and anti-spam software, data encryption and authentication services, and mobile phone security products.
Trefis said McAfee's share of this market grew to around 14.7 percent in 2009 from 11.2 percent in 2006 and accounts for about 34 percent of the $32 Trefis price estimate for McAfee's stock.
"Although McAfee faces stiff competition from Symantec in the business security market, we expect its share to grow modestly over the next few years, reaching 15.4% by the end of the Trefis forecast period," Trefis said, adding that McAfee is moving aggressively to expand the range of software that it hosts and delivers to customers over the Internet.
According to Trefis, the market for hosted software, also known as software-as-a-service (SaaS), has been growing at an annual rate of 30 percent over the last few years, and McAfee continues to expand its data loss prevention offerings, which is a critical area for business customers.
"If McAfee's share of the business security software market reaches 26% by 2016, instead of the 15.4% that we currently forecast, there could be a 25% upside to the $32 Trefis price estimate for McAfee's stock," Trefis noted.
Consumer Market
Trefis expects McAfee's consumer market share to reach 22.4 percent by the end of the its forecast period, despite competition from Symantec and smaller players like CA Technologies, AVG, TrendMicro and Kaspersky Labs.
McAfee sells several products to protect users from malware, spam and phishing attacks. Consumer antivirus software constitutes around 32 percent of the $32 Trefis price estimate for McAfee's stock. McAfee's share of this market grew to about 20.3 percent in 2009 from 16.5 percent in 2006.
McAfee's recent extension of its multi-year partnerships with Acer and Dell also bodes well for the company in the context that Acer and Dell are the world's second- and third-largest PC makers, respectively.
"If Intel manages to increase McAfee's consumer antivirus market share to around 36% by 2016, there could be an upside of at least 20% to the $32 Trefis price estimate for McAfee's stock," Trefis said.
Shares of Intel closed at $18.70 Monday on Nasdaq, while shares of McAfee ended Monday's trading at $47.10.
Business Market
For the business market, McAfee offers anti-virus, anti-spyware and anti-spam software, data encryption and authentication services, and mobile phone security products.
Trefis said McAfee's share of this market grew to around 14.7 percent in 2009 from 11.2 percent in 2006 and accounts for about 34 percent of the $32 Trefis price estimate for McAfee's stock.
"Although McAfee faces stiff competition from Symantec in the business security market, we expect its share to grow modestly over the next few years, reaching 15.4% by the end of the Trefis forecast period," Trefis said, adding that McAfee is moving aggressively to expand the range of software that it hosts and delivers to customers over the Internet.
According to Trefis, the market for hosted software, also known as software-as-a-service (SaaS), has been growing at an annual rate of 30 percent over the last few years, and McAfee continues to expand its data loss prevention offerings, which is a critical area for business customers.
"If McAfee's share of the business security software market reaches 26% by 2016, instead of the 15.4% that we currently forecast, there could be a 25% upside to the $32 Trefis price estimate for McAfee's stock," Trefis noted.
Consumer Market
Trefis expects McAfee's consumer market share to reach 22.4 percent by the end of the its forecast period, despite competition from Symantec and smaller players like CA Technologies, AVG, TrendMicro and Kaspersky Labs.
McAfee sells several products to protect users from malware, spam and phishing attacks. Consumer antivirus software constitutes around 32 percent of the $32 Trefis price estimate for McAfee's stock. McAfee's share of this market grew to about 20.3 percent in 2009 from 16.5 percent in 2006.
McAfee's recent extension of its multi-year partnerships with Acer and Dell also bodes well for the company in the context that Acer and Dell are the world's second- and third-largest PC makers, respectively.
"If Intel manages to increase McAfee's consumer antivirus market share to around 36% by 2016, there could be an upside of at least 20% to the $32 Trefis price estimate for McAfee's stock," Trefis said.
Shares of Intel closed at $18.70 Monday on Nasdaq, while shares of McAfee ended Monday's trading at $47.10.
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