E-BUSINESS SPECIAL REPORT
Microsoft - The New Antivirus Behemoth?

Nothing Microsoft (Nasdaq: MSFT) does goes unnoticed or underanalyzed -- and, true to form, the company's purchase of an obscure but well-regarded Romanian antivirus firm last month has sparked a torrent of speculation about its intentions in the security arena.

Established antivirus firms, such as Symantec (Nasdaq: SYMC) and Network Associates (NYSE: NET), were quick to downplay the threat posed by Microsoft's belated jump into the antivirus game, and some other observers scoffed at the irony of a firm with a reputation for producing vulnerable software taking a stab at security itself.

However, despite all the naysaying, no one has claimed the move is insignificant. After all, this is Microsoft we're talking about.

Romanian Candle

Microsoft said its purchase of privately held GeCAD Software eventually will lead to more secure products from the software giant, but it offered few details of its plans for the firm and its RAV brand of antivirus software.

Analysts said the move was almost certainly just one part of a bigger picture.

"Selling antivirus software is clearly not the whole story, but it's a good place to start," Graham Titterington, an analyst with UK-based research firm Ovum, told the E-Commerce Times. "It is a natural fit for packaging with Windows and Office."

In a report, Forrester Research analyst Laura Koetzle said the move could accelerate a trend in which antivirus firms are expanding their products to go well beyond passive virus detection to include more security monitoring and other services, such as security event management and intrusion detection.

"Eventually, Microsoft will deliver good enough antivirus code," she said.

More To Come?

Microsoft could not be reached for comment on this story, but at the time of the purchase, the company said it would put GeCAD's engineers to work integrating antivirus products with future versions of Windows, including next-generation platforms such as Longhorn.

Analysts were quick to point out that the company could be poised to make further forays into the security marketplace and that acquisition is a logical way for it to proceed.

"They've made it clear they intend to do whatever it takes to improve their security profile," Rob Enderle, another Forrester analyst, told the E-Commerce Times. "It's not going to be an overnight process, though."

Take the Desktop, Please

If Microsoft does become an antivirus player, its niche likely will be confined to the destktop, at least in the short term. Analysts say consumers likely will embrace software with antivirus protection somehow built in. Enterprises, however, probably will be another matter.

Gartner (NYSE: IT) vice president John Pescatore said Microsoft is "a long way" from having a viable product based on GeCAD's technology.

"Creating solid enterprise products will be especially difficult," Pescatore told the E-Commerce Times, because the best antivirus products work across all of the various platforms most enterprises already have in place.

Ripple Effect

Although no firms in the security space have said they will change to respond to the Microsoft competitive threat, analysts say that is exactly what will happen, though it likely will take some time for the industry to evolve.

"It's definitely going to be felt on the market," Pescatore said, adding that while a viable Microsoft product may be three years away, customers already can begin to leverage its inevitable arrival by demanding more and better service from their existing antivirus firms.

"This move may actually spur the industry to innovate and expand its reach, which would benefit everyone," he noted.