McAfee Girds For Microsoft Competition

Microsoft’s acquisition of anti-virus vendor Sybari sent shares of competing players down Tuesday on news that Microsoft was entering the security space.

But at least one security software provider said it is ready to compete with Microsoft via Redmond’s purchase of Sybari. Gene Hodges, the president of anti-virus and security software firm McAfee , said Microsoft’s entry into the sector won’t change the landscape, at least not yet.

“The product Microsoft bought is one that we are familiar with. It’s a product we compete against and beat on a regular basis,” he told

Hodges said it would likely take Microsoft more time to amass all the pieces it is looking for in order to build out its security portfolio and then arrange them in a competitive mode.

But Microsoft is apparently eager to do just that, and willing to pay top dollar. According to a research note from Joel Fishbein of investment advisory firm Janney Montgomery Scott, “it is our understanding that Microsoft paid a significant premium to the proposed offering.”

Sybari, which had registered for an initial public offering in May of 2004, was looking for a $57.5 million maximum offering size allowed by filing, Fishbein noted. With annual revenues of about $45 million to $50 million in 2004, Sybari’s offering range was between $14 to $16 a share, which would have given Sybari a market capitalization of between $160 million and $170 million.

Shares of Symantec slid by $1.51 Tuesday after the Microsoft acquisition was announced to close at $22.09. McAfee shed $2.14 to close at $23.82.

Hodges said he knows what he’s up against now that Microsoft is purchasing a competitor. “We know that they will be a significant force. We don’t believe that they are an irresistible force,” he added.

“Customers will evaluate the product on how well they do the job and if McAfee’s product does the job better I think they’ll buy us rather than Microsoft.”

A common Microsoft business tactic that has allowed it to achieve market domination in certain sectors is its legendary use of bundling of other technology with it core operating system.

As to whether Microsoft might integrate Sybari’s technology into its products, a Microsoft official said it may be considered eventually with some of its server-side products. But for now, Sybari is expected to remain a separate company with separately offered products.

McAfee’s Hodges said the idea of Microsoft bundling its anti-virus product in future product releases would be detrimental to the industry.

“I think that move would probably decrease the overall quality of security of the Internet,” Hodges added. “It would stifle innovation by taking the air out of a large number of products, not just the anti-virus community. So over time I don’t think that users will be safer because of that.”

He said McAfee will compete with Microsoft by pushing the boundaries of its technology and innovation.

“We’ve already told our customers what we plan to do in terms of providing pro-active intrusion detection capability, kind of the next generation of technology that complements anti-virus. That helps them make good decisions about managing their risk,” Hodges explained.

“That’s the way we compete most effectively, by coming up with new innovations that are effective against the near term threat.”

Symantec and Trend Micro did not respond to requests for comment.

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