Forbes’ Stiennon Suggests Intel Spin Off McAfee To Restore Growth

Forbes continues to pump out the spinoff ideas. The other week, we highlighted a Forbes piece nominating five companies ripe for a spinoff, including big names such as Disney (DIS) and Time Warner (TWX). That wasn’t all though. A recent idea in Forbes by Richard Stiennon was that chip powerhouse Intel (INTC) should spin off McAfee, its internet security business. In fact, he offered five reasons why a spinoff makes sense here and I’ve condensed the list a bit here:

1. Symantec(SYMC) is coming back – Symantec has made a lot of operating mistakes over the years, but is starting to turn things around. He likes its planned Veritas spinoff [it ended up being sold to PE firm]. Basically, he thinks McAfee is in trouble once Symantec starts focusing on its core business because McAfee hasn’t been able to take advantage while its peer struggled.
2. Brand Confusion – Intel isn’t known for security and the McAfee name has some odd associations. Not a good fit.
3. Internet of Things – the PC market is slowing and Intel’s Internet of Things division is growing quickly. It should focus on the growing areas and not on McAfee
4. Finance – basically, a spinoff could avoid a possible goodwill writedown and also, security companies are attracting high multiples these days so maybe McAfee would as well
5. Security is changing too rapidly – as a division of Intel it will be hard for McAfee to keep up with the rapid changes in the space. Focused management would be a boon

Some of these reasons are more compelling than others and have been offered as reasons for plenty of other spins. For example, multiple rerating is quite common. Typically, that is something an activist would point out, but are high flying companies in the space really McAfee peers?

It’s difficult to fully get a handle on the current state of McAfee’s business because as Mr. Stiennon notes, Intel buried McAfee into one of its reporting units. Based on the revenues at the time of the acquisition and on the unit’s current revenues, growth appears to have been non-existent. It’s quite possible sales have actually declined over the years. Goodwill doesn’t tell the entire story.

An interesting idea, but perhaps Intel likes the business and views it as an avenue of growth while its chip business matures. Of course, a spinoff would be an open admission that its 2010 $7b+ acquisition of McAfee was a bust – not too many management teams are keen to make such statements.

Nothing going on here right now, but worth filing this one away.

Disclosure: Author holds shares of DIS and TWX