McAfee Sells Enterprise Security Business; Separately, Feds Charge Founder
The vendor will solely target consumers. Separate but related, John McAfee could be headed for decades in prison.
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McAfee is selling its enterprise cybersecurity business to a consortium led by Symphony Technology Group. The price tag? A cool $4 billion. STG is a private equity firm based in Silicon Valley. Last year, it snapped up RSA. (That deal amounted to just more than $2 billion.) At first glance, the fit looks smart for STG. Pairing the capabilities of RSA and McAfee – or at least just having the companies in its security portfolio – could pay off big. That’s especially considering the growing number of cyberthreats confronting enterprises.
Investors liked the McAfee sale news. By midday on March 8, the day the McAfee and STG announced the deal, the company’s stock price had risen more than 13%. The price fluctuated amid trading activity, of course. However, the amount was the highest McAfee has seen in the last few months since once again going public. (The IPO in October raised more than $700 million.) McAfee took a decade-long hiatus from Wall Street prior to that.
STG did not immediately reply to a Channel Futures inquiry about its plans for McAfee’s enterprise channel partner program. Chances are, little or nothing will change. RSA still runs its partner program. That would seem to bode well for managed security service providers and other partners in McAfee’s indirect channel.
“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 to continue delivering exceptional performance to enterprises and government clients globally,” William Chisholm, managing partner at STG, said in a prepared statement.
The STG-led consortium will pay $4 billion in cash. If all goes as planned, the deal will close by the end of this year. STG should do well. In fiscal year 2020, McAfee said the enterprise cybersecurity unit reported $1.3 billion in net revenue. And as a result of the sale, McAfee expects to reduce its debt by $1 billion. Furthermore, the company will pay around $175 million for “customary transaction expenses and other one-time charges.”
The remaining $2.75 billion will go to holders, including McAfee Corp. That entity will use its portion of the proceeds for $300 million in corporate taxes and related payments related to the transaction. It also will use the remaining proceeds to pay a one-time special dividend of $4.50 per share to Class A Common Stock holders. Finally, McAfee expects to pay another $300 million in one-time separation costs and so-called stranded cost optimization.
Until the deal closes, McAfee will keep operating and supporting the enterprise division. In the meantime, STG says it will be working with McAfee and the enterprise business’s executives to execute a smooth transition. STG will, however, rebrand McAfee’s enterprise group. So, channel partners will be selling the same technology under a different name.
“This transaction will allow McAfee to singularly focus on our consumer business and to accelerate our strategy to be a leader in personal security for consumers,” said Peter Leav, president and CEO of McAfee.
All in all, rebranding could prove smart if STG, like Intel, wants to shed associations with John McAfee. More on that next.
Intel bought McAfee in 2010. It then tried to refocus its security efforts toward the data center by renaming the acquired company Intel Security. (There was also the bonus of shedding ties to troubled McAfee founder John McAfee and his erratic behavior.) After that, Intel spun out the security unit in 2017 as an independent entity. That was when alternative asset manager TPG poured $4.2 billion into the vendor. And the McAfee name returned. McAfee has spent the intervening years rolling out a number of platforms and beefing up its channel programs. But the name association with the vendor’s billionaire founder has continued to cast a shadow.
To answer the question, a lot. Recall that last year, the feds were pursuing McAfee for tax evasion. The U.S. Department of Justice, the Internal Revenue Service and the Securities and Exchange Commission all wanted a piece of McAfee. In the fall, they found the globetrotting tech pioneer at an airport in Spain, just as he was about to flee to Istanbul. Authorities detained McAfee before he could leave. He has remained in Spain since then, held on criminal charges tied to tax evasion.
Then came March 5, 2021. That’s the day a separate unit of the U.S. Department of Justice, alongside the FBI, levied fraud and money-laundering charges against McAfee and his bodyguard/executive adviser, Jimmy Gale Watson Jr. (Watson is a former Navy Seal.) The allegations tie to McAfee’s efforts to profit from cryptocurrency investments. Authorities say he used his Twitter account to spread information to hundreds of thousands of followers. But he didn’t tell those followers he, Watson and other associates had bought large quantities of those cryptocurrencies. So, the feds say, McAfee (and Watson) inflated market prices and profited to the tune of more than $13 million between 2017 and 2018.
Here are the charges the U.S. Justice Department and FBI are bringing against McAfee and Watson:
–Conspiracy to commit commodities and securities fraud.
–Conspiracy to commit securities and touting fraud.
–Wire fraud conspiracy and substantive wire fraud.
–Money laundering conspiracy offenses stemming from two schemes relating to the fraudulent promotion to investors of cryptocurrencies qualifying under federal law as commodities or securities.
All that is according to a March 5 press release from the U.S. Justice Department. Authorities call the allegations against McAfee and Watson a “pump and dump” scheme.
Decades, potentially. If they are convicted on all counts and receive the maximum sentences, McAfee and Watson will end their lives in prison. McAfee is 75 years old. Watson is 40. The charges carry time of at least 50 years behind bars. But McAfee also is up against separate tax evasion charges, which carry up to an additional 30 years in prison.
The two also face financial penalties, which likely will be hefty.
“When engaging in illegal activity, simply finding new ways to carry out old tricks won’t produce different results,” FBI Assistant Director William F. Sweeney Jr., said in a press release. “Investment fraud and money laundering schemes carry a strict penalty under federal law.”
Watson is in federal custody. Authorities arrested him in Texas on March 4.
“Jimmy Watson is a decorated veteran and former Navy Seal. He fought for other people’s rights and liberties, and he is entitled to and looks forward to his day in court to exercise some of those very rights,” said his lawyer Arnold Spencer, according to the BBC.
McAfee is still in detention in Spain. It’s not clear when he will be brought back to the United States. Janice McAfee, McAfee’s wife, posted on Twitter on Feb. 26 that she is seeking an American lawyer to work with her husband’s Spanish lawyers. “Preferably someone from Tennessee & has a sound understanding of cryptocurrency,” she wrote.
The Washington Post reports that McAfee’s extradition is pending.
McAfee took to Twitter on March 6, the day after feds charged him, to defend himself. Here’s a sampling of what he told his 1 million followers:
“Even as it crashed I held every single coin allocated to me. I never sold a single coin. I believed in the company to the very end.”
“Much of the new allegations from the Feds are about my ‘coin of the day’. For a few days in 2017 I chose coins I believed had value. One of them was Doge – now being touted years later by Elon Musk. The coin has increased well over 1000% since I chose it. Not a pump and dump.”
McAfee took to Twitter on March 6, the day after feds charged him, to defend himself. Here’s a sampling of what he told his 1 million followers:
“Even as it crashed I held every single coin allocated to me. I never sold a single coin. I believed in the company to the very end.”
“Much of the new allegations from the Feds are about my ‘coin of the day’. For a few days in 2017 I chose coins I believed had value. One of them was Doge – now being touted years later by Elon Musk. The coin has increased well over 1000% since I chose it. Not a pump and dump.”
The McAfee name brings to mind a number of associations. Think groundbreaking antivirus and technology platforms, but also an erratic, eccentric billionaire founder. We’ll address that second part in a bit. But first, a look at why the company was making waves Monday.
McAfee is selling its enterprise security division to a private equity firm. In essence, the cybersecurity vendor will no longer target businesses. What does that mean for McAfee channel partners? Click through the slideshow above to find out more.
Now, perhaps with some apologies for bringing the aforementioned event together with this one, federal authorities have gained ground in their efforts to get John McAfee back onto U.S. soil.
On March 5, they laid out a number of charges against McAfee for fraud and money laundering. The timing of a McAfee sale and this news is likely coincidental, but it is interesting. That’s especially the case given the long saga that has been the narrative of John McAfee since he resigned from the company in 1994. From running a failed bid for the 2016 U.S. presidential race to being a person of interest in a murder in South America, and more, McAfee has spent years living anything but a normal or sedate life. And it looks like he could end it that way, too.
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