McAfee to Acquire tenCube – Analyst Blog

Internet security company McAfee Inc. (MFE) recently signed a definitive agreement to acquire the privately held mobile security company tenCube. The acquisition is expected to close by the end of this month.

 

Founded in 2005, Singapore-based tenCube is a provider of Wavesecure service that helps secure information in any mobile phone. Wavesecure uses technologies that help locate a mobile phone as well as lock, back-up or delete all information stored in the device and its memory card. This ensures the protection of any information stored in a user’s mobile phone in case of theft or loss.

 

The acquisition will enrich McAfee’s portfolio with the addition of tenCube’s Wavesecure service suite. The technologies used by Wavesecure will be integrated into Trust Digital’s (acquired by McAfee in June 2010) Enterprise Mobility management solutions and McAfee’s mobile security technology.

 

As per the survey conducted by Swedish telephone company, Ericsson, the number of IP connected devices could swell to approximately 50 billion by 2020 from 1 billion at present. This will undoubtedly increase the demand for security solutions to protect both the device and the lost data.

 

The acquisition will provide McAfee with competencies for delivering the next generation mobility platform for consumers and enterprises.

 

We believe that McAfee’s leading position as a security-solution vendor will enable the company to take advantage of Ericsson’s forecast, thereby securing revenue streams in the coming quarters.

 

However, we feel that acquisitions are becoming too common in the security-space, thereby raising chances of stiff competition. Recently, another security-solutions vendor Juniper Networks Inc. (JNPR) acquired mobile-security solutions provider SMobile Systems Inc., to enhance its security-solutions portfolio.

 

Nevertheless, McAfee has a strong product portfolio and solid growth prospects in all its served markets to its advantage. Moreover, McAfee delivered respectable second-quarter results, although the earnings per share were in line with Zacks Consensus Estimate. Increased acquisitions, customer win momentum and good cash generation ability are also positives.

 

On the other hand, we are a bit concerned about the intense competition that the company faces from smaller players, as well as hardware and software manufacturers entering the IT security business. Additionally, the enhanced level of security offered by Microsoft Corp.‘s (MSFT) Windows OS also pose some challenges to McAfee.

 

We currently have a short-term Hold recommendation on McAfee implying a Zacks #3 Rank.