In one of the more surprising pieces of news to hit the world of IT in the past year, cybersecurity giant McAfee announced it would be offloading its entire enterprise business.
In a press release in early March, the company stated it will become a pure-play consumer cybersecurity company.
McAfee executives reached a definitive agreement to sell its Enterprise business to a business consortium led by Symphony Technology Group (STG) in an all-cash transaction for $4.0 billion. The deal is expected to close by the end of this year following customary and regulatory approvals and closing conditions.
The most interesting aspect of McAfee’s decision is there seems to be no clear reason for it. In explaining the move, McAfee CEO Peter Leav only had this to say about it: “STG is the right partner to continue strengthening our Enterprise business, and this outcome is a testament to the business’ industry-leading solutions.” McAfee turning to focus entirely on the consumer side is striking since it is by far the weaker and less profitable aspect of its business. Back in the day, during the Windows XP era, McAfee was able to build a name for its products. However, that has substantially slowed down in recent years. Windows as a whole has become a lot more secure and now features free built-in antivirus software, so fewer users are turning to McAfee for their virus protection. Conversely, McAfee’s Enterprise business has been a staple of the security industry for over three decades. Over the years it has become the recognized leader for device-to-cloud cybersecurity solutions. Today, the Enterprise service is used by some eighty-six percent of all Fortune 100 firms around the world and realized $1.3 billion in net revenue in the fiscal year 2020.
Blow to the Industry
Beyond the strange nature of the McAfee STG deal, there is another equally important consequence that comes with this sale.
Whenever a major transfer of assets occurs, there will inevitably be costs in the knowledge transfer being received by the acquiring firm. A company dealing with a specific product set, services, and administration of a system for its customers for decades, cannot simply hand off all that experience to a buyer. This in turn ultimately leads to stagnation in service quality, lower customer support, and slowing down of innovation. Unfortunately, this trend seems to be becoming more common in the IT-sphere as of late. Many market analysts were quick to point to the similarity between STG’s acquisition and Broadcom’s purchase of Symantec’s enterprise business back in late 2019. Only months after, the buy Broadcom was forced to sell off its Symantec assets to the Irish consulting firm Accenture and Symantec’s decline continued. Jeff Pollard, vice president, and principal analyst with Forrester was quoted “Without doubt, they will be renamed, debut with a shiny new logo and inevitably IPO again in a few years. The talk track will definitely ignore that the company is a patchwork of once-relevant security vendors that failed to keep up with where the market was going,” Pollard says. “Unfortunately, acquisitions like this often make investors successful, but almost never result in benefits for the customers buying the security solutions of these companies.”
Indeed, it is exceedingly difficult for an acquiring firm to take over operations and delivery of an existing service, even when the product has the name and market force associated with a company like McAfee. Like other similar deals, the McAfee transfer will likely result in an overall loss for industry consumers.
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