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Intel Offers Remedies to EU Concerns Over McAfee Bid

Intel Offers Remedies to EU Concerns on McAfee Bid
Intel Corp. made proposals to the European Union to address antitrust concerns about its $7.68 billion purchase of McAfee Inc. Photographer: Tony Avelar/Bloomberg

Jan. 6 (Bloomberg) -- Intel Corp., the world’s largest chipmaker, made proposals to the European Union to address antitrust concerns about its $7.68 billion purchase of McAfee Inc.

Intel offered commitments to the EU and regulators extended their deadline to rule on the deal by two weeks to Jan. 26, the European Commission said in a statement on its website today. Regulators didn’t give details about Intel’s proposal.

“I can confirm we filed an offer,” Chuck Mulloy, a spokesman for the Santa Clara, California-based company, said in a phone interview today. He declined to say what the company had proposed. Intel still expects the transaction to close in the first half of 2011, Mulloy said in an interview yesterday.

Intel is counting on McAfee’s technology to help it add security measures to its semiconductors for computers, smartphones and other devices. McAfee is the second-largest maker of security software, behind Mountain View, California-based Symantec Corp. The EU is looking at whether Intel’s plan to build computer-security features into its chips would hurt competitors, the Wall Street Journal reported last month.

“These two business segments are mostly unrelated right now, so I don’t expect there’s a significant antitrust issue,” said Thomas Becker, an analyst at Commerzbank in Frankfurt. “I wouldn’t expect the concessions to involve anything really major, like selling part of McAfee.”

80 Percent

Intel’s processors run more than 80 percent of the world’s personal computers. In addition to helping the company add security features to its PC chips, McAfee is part of Intel’s plan to expand into new areas, such as mobile phones and consumer electronics.

Computer functions run more quickly when woven directly into a chip, without having to go through other programs, Intel said when it announced the deal. That also makes it harder for hackers to attack the processes.

Offering remedies in the first part of an EU merger review “saves everybody time and money” if it helps a company avoid an “extraordinarily burdensome,” in-depth probe that can last as much as four months, said Robert Fleishman, a lawyer with Steptoe & Johnson LLP in Brussels.

Intel plans to run McAfee as an independent company, under the leadership of current Chief Executive Officer Dave DeWalt. It also will continue to sell stand-alone software. New Intel chips, which would include capabilities provided by McAfee, would go on sale next year.

Licensing Fees

Commitments likely to soothe regulatory worries over company behavior in the high-tech sector may include terms and fees for technology licensing, Fleishman said.

“There’s a certain skepticism” among regulators over so-called behavioral remedies that aim to eliminate harm caused by lack of compatibility or bundling products together, said Paul McGeown, a Brussels-based lawyer with Hunton & Williams LLP, in a phone interview.

“Behavioral undertakings require long-term monitoring and policing,” he said. “The commission may want to push the case into phase two to give it more time to check that the remedy works.”

Intel won U.S. approval for the deal last month. The company in 2009 was fined 1.06 billion euros ($1.39 billion) by the EU over allegations the company impeded competition by giving rebates to computer makers that buy all or almost all of their chips from Intel.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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