In your upcoming September issue of The Complete Investor, our Growth article highlights some of our well-performing tech stocks. Despite the weak domestic economy, our franchises have bucked the trend – outperforming their own, and Wall Street’s, profit and sales expectations. Among others, we highlight Intel (INTC), the largest semiconductor company in the world, in regards to its stellar earnings report for the second quarter, as well as its desires to make a bigger splash in the mobile chip market with a proposed acquisition. After the issue went to print, however, Intel surprised the market with a different major acquisition.
Last Thursday, Intel announced its largest acquisition ever with the $7.68 billion purchase of security software maker, McAfee. Both boards unanimously approved the deal which will provide McAfee shareholders with $48 a share in cash – a 60 percent premium over the stock’s previous closing price. At first glance, the move seemed curious with a dominant hardware company making an expensive foray into software. The multiple, at 3.3 times revenue, is high relative to the average premium paid for internet security acquisitions. According to Bloomberg data, there have been 171 acquisitions in the internet security business over the last five years – the median sales multiple was 2.07. Of course, Intel could easily afford it with roughly $18 billion in its cash coffers.
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