Daily Archives: December 17, 2009

McAfee Commits to China, Establishes Wholly Owned Subsidiary

As I’ve discussed previously in venerable forum, security-software vendors face unique challenges in trying to crack the potentially lucrative Chinese market.

Notwithstanding those challenges, security-software market leaders such as Symantec, McAfee, and Trend have every intention of pursuing opportunities in China. To do so, they must find the right mix of product offerings (including localization), positioning, pricing, and channel partners.

To succeed in China, though, vendors must commit to China. Responding to that imperative, McAfee said yesterday that it would establish a new wholly owned subsidiary in China.

In Beijing to make the announcement, Dave DeWalt, McAfee’s president and CEO, issued the following statement:

“China offers compelling opportunities for McAfee. China has great potential as a center for manufacturing, research and development for McAfee and is also a significant burgeoning market for our products. McAfee has continuously strengthened its presence in China over the last decade and we are planning to expand our investment in the near term to take full advantage of the opportunities China presents.”

McAfee estimates that its potential addressable market in China will grow from about $390 million in 2009 to $1.09 billion in 2013.

In a press release accompanying the announcement of its new Chinese subsidiary, McAfee explained that its Chinese expansion also would include the following:

• A new call center planned to open in Beijing in February 2010 to service the mid-market segment, particularly in smaller cities across China.

• Additional headcount in functions including sales, sales engineering, marketing, support and research and development (R&D), including a planned doubling of the field sales organization in 2010.

• Recently signed reseller partnerships with both Neusoft and CS&S (China National Software and Services) who have become premier partners for McAfee products in China.

• A partnership with Lenovo to market McAfee VirusScan products through Lenovo retail outlets across China, opening up a significant retail channel for McAfee and contributing to our position as the world’s largest dedicated security technology company. McAfee products ship on more than 50% of the PCs shipped by the top 10 PC OEMs.

• A partnership with Dell to offer China consumers 15 month subscriptions on all their retail and direct systems with a Microsoft Windows preinstalled.

McAfee also plans to strengthen existing partnerships in the Chinese market and to establish new ones. Prior to the announcement, McAfee operations in China included sales, manufacturing of the McAfee Unified Threat Management Firewall, and an R&D team focused on mobile security, localization, and security research.

The cornerstone of this move, though, is the establishment of the wholly owned subsidiary. As DeWalt explained to PCWorld, McAfee’s formation of the subsidiary will give the company greater flexibility and more options relating to its China-based manufacturing and to the regulatory approval of its products.

Those considerations are significant. In China, McAfee not only competes against its traditional rivals, such as the aforementioned Symantec and Trend, but also against domestic Chinese software companies that have benefited from home-field advantage in more ways than one.

Cisco’s Chambers Says Tandberg Acquisition Went According to Plan

Come on, John. Just admit you were temporarily flummoxed. We all make mistakes, take a wrong step from time to time, and you and your boys got knocked back on your heels before regaining your balance on this one.

That was my reaction when I read a few days back that Cisco CEO John Chambers tried to persuade visiting financial analysts that his company’s turbulent $3.4-billion acquisition of videoconferencing-vendor Tandberg went pretty much according to plan.

Really, John? What sort of plan was that? Is that the one that includes needless digressions, unnecessary distractions, high-stakes gamesmanship, and take-it-or-leave-it ultimatums?

If so, then you must have too much time on your hands. Hey, I understand the desire to inject a little excitement into the acquisition process, but the Tandberg takeover was like the trajectory of a runaway roller-coaster. It was, well, a little out of control.

Yet we’re supposed to believe that Cisco foresaw every stage of the process and that the deal went down just like it was drawn up?

I have no idea whether Chambers made these claims with a straight face or with tongue firmly planted in cheek. Nor do I know whether the analysts reacted by rolling their eyes or putting down their notepads, refusing to play along with the charade. Perhaps, as guests, they felt that wasn’t an appropriate response.

Said Chambers of the takeover drama and of Tandberg itself:

“We went into it knowing the exact challenges that we would face. … It unfolded much like we anticipated. . . .

“Their leadership team may be the best total leadership team we’ve had since the acquisition of Crescendo in 1993.”

Crescendo, as industry historians will recall, brought Cisco a wealth of engineering and executive talent, including Mario Mazzola, Luca Cafiero, and Jayshree Ullal.

That just makes me wonder even more about how the tortuous Tandberg deal went down. If Tandberg has such great executive talent, and it was so strategically valuable to Cisco as a linchpin of its video strategy, then why not get the deal done faster, without the diversions and the shuck-and-jive tactics? Time is money, as the lawyers involved in this deal with attest.

As I said at the top of this piece: Come on, John.