Microsoft’s Glancing Blow at the Security Industry
The two biggest security-software makers lost a big chunk of their market caps on Wednesday, November 19, 2008–and not just because of the bad day for tech stocks. Microsoft announced late Tuesday that it would offer free antivirus software starting in the second half of 2009.
Symantec (off 9%) and McAfee (off 7%) are out in full force spinning Microsofts move as an admission that it never belonged in the security business. (Rowan Trollope, senior vice president of Symantecs consumer business, called it a capitulation in an emailed statement). And they’ve got a point: Microsoft has been selling a suite of security products called OneCare for more than two years; in announcing the new free offering, codenamed “Morro,” Microsoft said it would pull the plug on OneCare, which costs $49.95 a year.
But the stock-market reaction is not surprising. Free anything is disruptive for businesses that are trying to sell similar products. Yes, theres already free antivirus out thereAVG gives away its software, for examplebut free security software from Microsoft is big deal if only because it comes from Microsoft.
Todd Gebhart, McAfees executive vice president in charge of consumer products, calls the stock selloff a case of shoot first and ask questions later, adding that something similar happened when Microsoft first entered the security market with OneCare. And Microsoft hasnt stolen much business from the incumbents.
But Microsoft did shake up the market then, says Gartner analyst John Pescatore. Symantec bought Veritas in an effort to diversify its business. And both Symantec and McAfee were forced to drop their prices. So while Pescatore says that replacing OneCare with free antivirus software is a graceful way out of a business that Microsoft probably shouldnt have entered in the first place, it will also put pressure Symantec and McAfee in terms of pricing.
A Microsoft spokesman says that the goal of the new software is to make sure that every PC is protected, especially ones in the developing world where people may not be able to afford the $50 or so that commercial security software now costs.
-Ben Worthen
Source: WSJ.com: Business Technology