January 18, 2011 8:30 pm

Intel fights full probe into McAfee deal

Intel, the world’s largest chipmaker by sales, is fighting to avoid a full probe by European competition regulators into its proposed $7.7bn acquisition of McAfee, the US security software company.

Although the deal has been approved by US regulators, sources in Brussels say a decision whether to proceed to an in-depth inquiry, which could at least stall the deal for some months, is finely balanced.

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That is despite concessions made by Intel this month in a last-minute effort to head off the risk of intervention from Europe.

The threat is the latest twist in the confrontational relationship between Brussels and the chipmaker. Intel had appeared to be moving towards a smooth closing of the transaction after US regulators cleared it late last year, only for the company to be surprised by a late expression of concern from the European Commission about whether the deal would hurt other security software companies.

In 2009, the chipmaker was fined €1.1bn for abusing its dominant market position, the largest single penalty imposed on any company for competition breaches in the European Union. The company is appealing against that decision in the EU courts.

Competition officials at the commission have until January 26 to decide whether to move to a more protracted investigation, delaying the close and potentially forcing Intel to offer bigger concessions.

“I think it could go either way,” said one interested observer. The commission is expected to receive the results of an analysis of Intel’s proposed concessions this week.

Intel refused to comment on its discussions with Brussels, but said: “We continue to work with the commission, and believe [the deal] will be closed before the middle of the year.”

The regulators’ job is understood to have been complicated by pressure from at least one McAfee rival not to give unqualified approval to the deal. Failure to look closely enough into a complaint like this could open the commission to litigation later, forcing it to move cautiously, said one close observer. “They’re walking a very fine line,” this person said.

Another potential obstacle is that commission officials have become increasingly wary of the sort of “behavioural” commitments that Intel is understood to have offered, since such arrangements are hard to police. These are designed to reduce its ability to disadvantage security software from other companies from running on computers that use Intel chips.

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