Posted on: Tuesday, February 22, 2005

Microsoft faces virus software quandary

By Allison Linn
Associated Press

SEATTLE — If Microsoft Corp. doesn't do more to stem Internet attacks, the company risks further alienating customers unhappy with the multitude of threats already facing its ubiquitous software.

Sell its own security products, on the other hand, and Microsoft faces a potential backlash from some of its allies — the companies that now provide an extra layer of security for its Windows operating system, Internet Explorer browser and other products.

With a powerhouse like Microsoft becoming a competitor, they could get squeezed out.

What a quandary.

Last week, Microsoft Chairman Bill Gates confirmed plans to sell antivirus products to both consumers and big businesses by the end of the year. But the company is mum on cost and features.

Speaking at a security conference, Gates also said the company would give consumers a free tool for combating spyware, a pesky and growing threat that can monitor users' activities, hinder computer performance and create other hassles. Microsoft also will sell a more sophisticated antispyware product to businesses.

Executives in the security industry say they believe Microsoft's promise to continue sharing security information and working with other companies even after it becomes a direct competitor. Analyst Gregg Moskowitz with Susquehanna Financial Group said both sides have an incentive to "continue to play nice with each other."

The security companies are dependent on Microsoft to make sure their defenses run smoothly, while Microsoft cannot risk having competing security products break down and wreak more havoc on Windows, Moskowitz said.

"A very significant number of people, if they don't have a good security experience, they're going to hold it against Microsoft — even if they're using another vendor," Moskowitz said.

Still, John Schwarz, president and chief operating officer of Symantec Corp., would rather see Microsoft concentrate on fixing security flaws. "We believe they'd be better off in focusing on making sure that their platform, the Windows operating system, is less subject to attack," Schwarz said.

Microsoft has worked feverishly to better secure its products, including updating Windows XP with a new firewall and other security measures. But given their widespread use, the products are near-constant targets of attacks that take advantage of loopholes and flaws to hijack computers, steal personal information and cripple businesses.

McAfee President Gene Hodges calls its new competitor an example of "capitalism at its best."

But he said it will be a fair fight only if all companies have a level playing field in which everyone sells, rather than gives away, products.

Microsoft's move to sell antivirus software appears fair so far, Hodges said, though he said Microsoft's decision to give away antispyware could hurt smaller players who can't afford giveaways. "We would have rather they entered the market for spyware and competed," he said.

Security companies including McAfee already sell antispyware products, generally costing between $30 and $40, though a few give versions or trials for free.

Microsoft has downplayed the competitive angle, saying they are simply responding to requests from customers for more protection options. A director with the company's security and business unit, said the company is most concerned about people who have no extra protection at all.

Peter Kuper, an analyst with Morgan Stanley, believes Microsoft is interested in protecting its Windows franchise, not finding a new way to make money.

Symantec's Schwarz says his company's products will have an edge, especially with business customers, because they protect more than just Microsoft products. And McAfee's Hodges said he's confident his company's reputation will keep customers loyal.

"I'd rather fight Microsoft in the marketplace because we're convinced we can whip them," Symantec Chief Executive John Thompson said.