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Microsoft Spies a Whole New Market

By Cynthia L. Webb
washingtonpost.com Staff Writer
Friday, January 7, 2005; 9:55 AM

Microsoft's latest attempt to do its Windows customers a favor -- offering free spyware protection -- could pose a severe threat to the computer security industry as it prepares to withstand a heavyweight onslaught out of Redmond.

The markets took notice after Microsoft's announcement yesterday, which also included plans for a free anti-virus tool. Shares of McAfee Inc. and Symantec Corp. dropped on news of the new player on the block.

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The Washington Post wrote that Microsoft's "release marked a new foray for the software giant and prompted several analysts to suggest that the company would eventually enter the market for computer security software." Microsoft's anti-virus and anti-spyware software plans "could signal tougher times ahead for desktop security vendors, as Microsoft uses its size and influence to expand into markets now dominated by those companies, industry experts say," IDG News Service reported. The same article said "antivirus companies should now be on notice that Microsoft is coming, even if they somehow missed the software giant's earlier rumblings about entering the security market, says Laura Koetzle, an analyst at Forrester Research."
The Washington Post: Microsoft Offers Anti-Spyware Software (Registration required)
IDG News Service via PC World: Microsoft Sends Shivers Through Antivirus Market

Spyware is joining spam as a top scourge for Internet users, with some 80 percent of computers infected, according to researchers. Naturally, Microsoft doesn't want to miss out on the growing trend of providing PCs users with an arsenal of tools to fight those problems. The company also is looking for ways to bolster the security of its Windows operating system, a regular target of hacker attacks. The anti-spyware software release also puts consumers in charge of protecting their own systems, another piece of Microsoft's campaign for better security of its products. Along with the anti-spyware tool, Microsoft is offering software to remove computer viruses and worms from PCs. Both products, billed as "beta" or test versions, will be available starting Tuesday, though Microsoft's site already offers a preview of its AntiSpyware product.

Microsoft's anti-spyware plans are a result of its December acquisition of anti-spyware maker Giant Company Software. "Now dubbed Microsoft Windows AntiSpyware, Giant's former product is being released as a free download at Microsoft's Web site (www.microsoft.com/athome/security). Microsoft said the software is still in unfinished, or 'beta,' form and would not say when consumers can expect a final product," The Washington Post reported. Reuters wrote that the Giant-based program "eliminates programs that generate unwanted pop-up ads and secretly record a computer user's activities."
Reuters: Microsoft Offers Anti-Spyware Program

Last month, Forrester Research highlighted the expected anti-spyware software plans of the Redmond, Wash.-based software giant after the acquisition. "With an anti-spyware software in its portfolio, Microsoft will be able to satisfy its customers' demands for more protection. Windows 2000 and XP users will see the benefits from this purchase within the next month when Microsoft releases a beta version of its new anti-spyware product for download. Microsoft's entry puts significant pressure on smaller spyware vendors, such as Lavasoft and Webroot. Larger security vendors will also need to innovate to provide significant additional value above Microsoft's product."

In its own research note last month, Gartnerwrote that Microsoft's anti-spyware software plans aren't geared for businesses. "Enterprises will still need separate anti-spyware technology at least until then. The antivirus industry has been disturbingly slow in addressing this requirement, leaving a huge market opening for major vendors such as Microsoft and Computer Associates. The Giant acquisition gives Microsoft an opportunity to exploit that opening with an integrated product. However, Giant's product -- like most anti-spyware products on the market today -- is essentially a consumer-grade product, rather than an enterprise-level application," Gartner said. "To remain competitive, antivirus vendors must either accelerate their lagging spyware product development cycles or acquire one of the remaining smaller anti-spyware vendors. Gartner believes that in mid-2005, Microsoft will deliver a combined [anti-virus/anti-spy ware] product for consumers and small businesses at a price point at least 20 percent lower than traditional stand-alone antivirus vendors)."

The Seattle Post-Intelligencer and the Seattle Times ran an Associated Press article on the news, reporting that Microsoft says the software isn't intended to compete with the security industry's products. "But a senior Microsoft executive confirmed the company's plans to sell its own anti-virus software, which would compete against programs from McAfee, Symantec and others," the wire service reported.
The Associated Press via the Seattle Post-Intelligencer: Microsoft Offers Free Anti-Virus Programs

The Wall Street Journal wrote more in this vein: "Mike Nash, head of Microsoft's security business said the new malware tools, available through the Windows Update Web site, are 'no way a substitute for traditional antivirus software,' but are intended to provide a measure of protection for the approximately two-thirds of computer users who haven't installed antivirus software. Symantec's recent agreement to purchase Veritas Software Corp. was in part motivated by its need to reduce its exposure to the consumer antivirus market in the face of Microsoft's anticipated entry."
The Wall Street Journal: Microsoft Offers Free Software To Fight 'Spyware' and Viruses (Subscription required)

One analyst, speaking to the Wall Street Journal, gave Symantec some hope. "Over time, if you look at the history of how [Microsoft has] approached new [segments] in the software industry, it is conceivable to think within the next three to five years, they'll get a meaningful piece of the market. But I do not think Symantec will lose significant market share in the near term," said analyst Ken Kiarash of Buckingham Research Group. Tony Ursillo, an analyst at Loomis Sayles & Co. in Boston told Bloomberg: "Microsoft has been getting so much heat about security flaws in their browser and operating system it's probably damaged the franchise a bit. This is a necessary step for Microsoft. The gravy is these are good businesses."
The Wall Street Journal: Parsing Microsoft's Move Into the Anti-Virus Market (Subscription required)
Bloomberg via Newsday: Microsoft To Offer Free Spy ware, Antivirus Tools

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