Private equity firm Symphony Technology Group (STG) has agreed to buy McAfee’s enterprise business for US$4 billion, turning the legendary cybersecurity firm into a pure-play consumer business.
The platform security company is following in the footsteps of top rival Symantec, which sold its enterprise business to Broadcom in November 2019 for US$10.7 billion and continues to operate its consumer business under the NortonLifeLock brand. This time around, McAfee’s enterprise business will be rebranded while its consumer business continues to be publicly traded under the McAfee name.
“STG is the right partner to continue strengthening our Enterprise business, and the outcome is a testament to the business’ industry-leading solutions and most notably to the outstanding contributions of our employees,” McAfee President and CEO Peter Leav said in a statement. “This transaction will allow McAfee to singularly focus on our consumer business.”
The split comes less than five months after McAfee completed a US$740 million initial public offering that valued the cybersecurity giant at US$9.5 billion. McAfee’s stock is up US$2.31 (10.9 percent) to US$23.50 in pre-market trading Monday, which is the highest the company’s stock has traded since the IPO. The all-cash deal is expected to close by the end of 2021, according to McAfee.
STG has moved aggressively into cybersecurity in recent years, most notably purchasing Bedford, Mass.-based encryption pioneer RSA in September 2020 for US$2.08 billion. The private equity firm was founded in 2002, and first got into cybersecurity with its April 2019 acquisition of network modeling and risk scoring platform RedSeal.
“McAfee is one of the most iconic brands in enterprise security and has a reputation for innovation, quality and leadership,” STG Managing Partner William Chisholm said in a statement. “We are fully committed to driving the business’ strategy to be the leading device-to-cloud cybersecurity company by partnering with McAfee’s existing world-class team.”ADVERTISING
McAfee’s enterprise business has struggled in recent years as its faces off against high-powered competitors like CrowdStrike and SentinelOne. Net revenue for the fiscal year ended Dec. 26, 2020, inched ahead to US$1.35 billion, up just 1.2 percent from US$1.33 billion a year earlier. And the division’s operating loss increased to US$180 million, up 19.2 percent from US$151 million a year earlier.
Similar to Symantec before its split, most of McAfee’s growth has been in its consumer business, where net revenue surged in the fiscal year ended Dec. 26, 2020, to US$1.56 billion, up 19.6 percent from US$1.3 billion a year earlier. And the division’s operating income skyrocketed to US$333 million, up 20.2 percent from US$277 million a year earlier.
The current top leaders for McAfee’s enterprise business are Lynne Doherty, who has run sales, pre-sales, channel and marketing since May 2020, and Shishir Singh, who has led product strategy and execution on an interim basis since Jan. 1 following the resignation of Ash Kulkarni. McAfee disclosed in January that it would be laying off 137 employees at its San Jose headquarters effective March 4.
Reports of McAfee looking to separate its enterprise and consumer businesses first started in December 2019, when The Wall Street Journal reported that McAfee was looking at joining its own consumer business with the US$2.41 billion pure consumer operation of rival NortonLifeLock. Under that scenario, McAfee’s enterprise and consumer units would have had different owners.
Two months after The Wall Street Journal report, McAfee brought in Peter Leav, the former CEO of BMC Software and Polycom, as its new CEO. He took over for Chris Young, who had led the business since October 2014 and oversaw the practice’s spinout from Intel into a stand-alone company in April 2017.