McAfee: Hiring May Squash Buyout Speculation

Mar. 7.07 | About: McAfee Inc. (MFE)

The Street seems generally enthusiastic about the appointment of former EMC (EMC) exec Dave DeWalt as the new CEO at McAfee (MFE). He’s an experienced exec; in fact, he was CEO of Documentum before that company was acquired by EMC in 2003.

The only catch is, there’s a theory that the appointment will put the kibosh on rumors that McAfee might be takeover bait.

Todd Weller, an analyst at Stifel Nicolaus, was worrying about that yesterday.

While we believe the appointment of Mr. DeWalt likely represents a long-term positive for McAfee, we also believe the announcement of a new CEO likely will be viewed as disappointing from the perspective of those investors that were playing McAfee on a takeout scenario. In our view, the appointment of a CEO with Mr. DeWalt’s credentials likely reduces the probability of a near-term takeout.

Sarah Friar, at Goldman Sachs, raised similar concerns.

We believe the Street may view this announcement to be a near-term negative, as there had been some acquisition speculation around McAfee after the resignation of former CEO George Samenuk. The hiring of a new CEO likely tempers this speculation, reducing the likelihood of a take-out premium in the stock. That said, we believe this is a long term positive for the stock, as DeWalt brings a great deal of experience to his new role… We would likely be buyers on any pronounced weakness in the stock.

On a day in which the Nasdaq rallied almost 2%, McAfee shares were down 11 cents, at $29.44.