Jim Cramer vs. John McAfee: From mad to crazy

Posted by Rob Enderle

Last week Jim Cramer of Mad Money clearly was having a slow news day and felt he needed to comment about the drama surrounding John McAfee.  

John, who left the technology industry nearly two decades and stopped being a CEO at the same time, isn’t exactly in Jim Cramer’s competence area (Jim isn’t an expert on Crazy People despite the name of his show).

So he had to do an ugly blend (his article here) in order to connect the dots and used John McAfee’s antics as a way to pound on the old Intel McAfee merger, suggesting Intel should have bought ARM Holdings instead. This implies that Jim Cramer is competing with John McAfee to see who is the most insane, and frankly I think Cramer is winning.

Intel + McAfee

First, let’s revisit why Intel bought McAfee in the first place: to obtain a unique pool of technology designed to secure mobile devices like smartphones. You see, prior to the merger, McAfee had been buying companies and technology, anticipating that smartphones and tablets would eventually be attacked much like PCs. However, it recognized that PC technology wouldn’t work - largely because mobile device really didn’t have any performance headroom.

The end result? An ugly compromise, even without security, where battery life is often too short and performance is inadequate. You put traditional anti-virus on top of this and most folks would likely find creative ways to turn the security software off because it was either killing performance or battery life (often both). 

The reason Intel felt it needed to go this route is because ARM was dominant in this class of device. As such, Santa Clara believed that once security became a serious enough problem, a product designed to address the related problems could displace ARM in market at similar price points. And given Intel would own the related intellectual property, it would be far more difficult for ARM to build a similar product.

Intel’s stated strategy was to design a processor with the above-mentioned technology baked in, a process which apparently takes between 3-5 years. Nevertheless, we have yet to see the outcome of this effort.  

Buy ARM Holdings

So Jim Cramer either completely ignored, or didn’t know about, Intel’s strategy with McAfee and suggested Intel should buy ARM holdings. Then again, buying, or even trying to buy ARM would have resulted in disaster.

Because Intel is so dominant in the PC space, the company is on the edge of an anti-trust event and all it would take would be an attempt to buy a large competitor to get the Federal Trade Commission and the European Commission to sit on them hard. The trigger would be Nvidia, Qualcomm, Samsung, Apple, Microsoft, Freescale, Marvel, Google and every other ARM licensee filing formal complaints.  

Even if their bid was allowed to proceed, these firms would likely bid against Intel as a consortium driving up the price of ARM holdings and, should Intel win the bid, Intel would be left financially drained and facing large anti-trust challenges. If they were to lose, the bad will created with Microsoft, Samsung, Apple, and Google would likely destroy their existing markets.  

These firms would probably band together due to Intel's monopoly risk, reducing Santa Clara's available market by anything from 40% to 80% - effectively crippling the corporation 

So while the true benefit of McAfee hasn’t been realized yet and is still months/years away, trying to acquire ARM Holdings would have been a going out of business strategy and while Jim Cramer may be looking to retire soon, the Intel employees and executives are clearly not on the same page.  

Wrapping Up:  Jim Cramer is nuttier than John McAfee

John McAfee is obviously having personal issues and you could question his judgment when he decided to leave Belize and go to Guatemala. But suggesting that Intel buy ARM Holdings rather than McAfee without knowing why Intel acquired McAfee and ignoring the anti-trust, litigation, and bidding issues involved in such a move is truly nuts.  

Somehow Cramer has apparently moved from Mad Money to just being Mad. I think he likely should consider leaving John McAfee alone following the age old advice that folks in glass houses shouldn’t throw stones. Or, suggesting someone is nuts and then saying really crazy things isn’t the wisest course of action.  

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