- The Washington Times - Sunday, February 20, 2005

SEATTLE (AP) — If Microsoft Corp. doesn’t do more to stem Internet attacks, the company risks further alienating customers who are 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.

If a powerhouse like Microsoft became a direct competitor, they could get squeezed out.

What a predicament.

Last week, Microsoft Chairman Bill Gates confirmed plans to sell anti-virus products to both consumers and big businesses by the end of the year. But the Redmond, Wash., company is mum on costs and features.



Speaking at a security conference, Mr. 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 anti-spyware product to businesses.

Executives in the security industry say they believe Microsoft’s promise to continue sharing security information and working with other security 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 that their defenses run smoothly, and Microsoft cannot risk having competing security products break down and wreak more havoc on Windows, Mr. 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,” Mr. 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,” Mr. 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 Inc. 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 anti-virus software appears fair so far, Mr. Hodges said, although Microsoft’s decision to give away an anti-spyware product could hurt smaller players who can’t afford such giveaways.

“We would have rather they entered the market for spyware and competed,” Mr. Hodges said.

Security companies including McAfee already sell anti-spyware products, generally charging between $30 and $40, although a few offer free versions or trials.

Microsoft has downplayed the competitive angle, saying it is simply responding to requests from customers for more protection options.

Amy Roberts, 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, thinks Microsoft is most interested in protecting its Windows franchise, not finding a new way to make money.

The security problems are costly and damaging to Microsoft’s reputation, he said, and failure to address the threats could drive more customers to competing products such as the Mozilla Firefox browser or Apple Computer Inc.’s Mac OS computers.

“They’re not winning the war. They’re not winning the battle,” Mr. Kuper said.

“So Microsoft is saying, ‘I don’t care whether it’s free, as long as it’s something. That’s better than nothing.”’

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