We're talking about $7.7 billion. I'm not sure it's quite as rosy a picture as you paint. I'm not that familiar with McAfee's annual profits, but even if they make $500 million a year, we can value the talent they cherry-pick at an absurdly high value of $1 billion, and it would still take Intel well over 10 years to recoup the investment, assuming stable revenue streams.
A simplified perpetuity of $175m @ 6% would have a PV of ~= 3b. I'm having trouble seeing how they'd ever break even based on profits alone. I just can't imagine what kind of integration with existing products they think will add another 4.7b.
Thanks, I was about to head into a meeting and didn't have time to do the research. Assuming $175 million in profits per year, that means 44 years to breakeven, ignoring the talent acquisition angle. How much are 20 (or even 50) good programmers worth?
Several other companies in that market went down a similar amount, so it doesn't seem to be extraordinary. I would expect a lot of tech investors to move their money to McAffe after that announcement hoping to get something out of it.
What matters is what happens after now. If it continues to go down for a long time, it might be a problem.
They would be ecstatic with that kind of return. Without growth and still making a hefty return. McAfee has ~$2b in revenue but an operating income of "just" $221m.
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We're talking about $7.7 billion. I'm not sure it's quite as rosy a picture as you paint. I'm not that familiar with McAfee's annual profits, but even if they make $500 million a year, we can value the talent they cherry-pick at an absurdly high value of $1 billion, and it would still take Intel well over 10 years to recoup the investment, assuming stable revenue streams.
A simplified perpetuity of $175m @ 6% would have a PV of ~= 3b. I'm having trouble seeing how they'd ever break even based on profits alone. I just can't imagine what kind of integration with existing products they think will add another 4.7b.
6% seems a little high given the current climate, no? Take that down to 3% and you're in the neighborhood of the deal price.
Still not sure if I agree with the deal, and it does seem driven by a bunch of cash burning a hole in Intel's pocket.
$173 million in 2009, up from $172 in 2008 and $166 in 2007. It seems odd to make an assumption when the real answer is seconds away!
Thanks, I was about to head into a meeting and didn't have time to do the research. Assuming $175 million in profits per year, that means 44 years to breakeven, ignoring the talent acquisition angle. How much are 20 (or even 50) good programmers worth?
http://online.wsj.com/article/SB1000142405274870447610457543...
Intel's stock only took a small dip, and it looks like some of those who left were shifting it to McAfee to ride the wave as the stock went up.
That's a lot of investors in an otherwise volatile market not jumping ship, so they must see something good in the deal that we're missing.
Either that, or stock market prices are much less connected to business fundamentals than one would hope.
Small dip??? Intel lost $3.5 billion in market cap on the news. McAfee gained $2.6 billion.
$3.5b is a big number, but it's only 3% of their market cap.
http://www.google.com/finance?client=ob&q=NASDAQ:INTC
Several other companies in that market went down a similar amount, so it doesn't seem to be extraordinary. I would expect a lot of tech investors to move their money to McAffe after that announcement hoping to get something out of it.
What matters is what happens after now. If it continues to go down for a long time, it might be a problem.
They would be ecstatic with that kind of return. Without growth and still making a hefty return. McAfee has ~$2b in revenue but an operating income of "just" $221m.