Market Hot for Security Software
By Jon Swartz
SAN FRANCISCO — The security-software market has never been so hot, or so crowded.
Even the biggest player, Symantec, is feeling the fallout.
Earlier this month, Symantec said revenue would grow to $5 billion in its 2006 fiscal year, short of the $5.2 billion analysts expected. Symantec blamed lower sales of consumer anti-virus software on competition and a late product release, and cited pricing pressures in the corporate anti-virus market. Symantec shares have melted to $19.64 from $30.29 last year.
As more consumers and businesses protect their PCs with security software, companies such as Microsoft and Comcast are grabbing for a piece of the fledgling $5.5 billion market, says Sean Jackson, an analyst at investment bank Avondale Partners.
“Symantec cannot grow as rapidly as it has done in the past,” says Richard Williams, an analyst at brokerage firm Garban Institutional Equities.
The upshot: more choices for consumers; more foes for Symantec and rival McAfee.
*Microsoft. The software leviathan next year plans to release Windows OneCare, a package for consumers that includes anti-virus software, firewall, anti-spyware software and data backup. “Microsoft is the wild card in all this,” says analyst Gene Munster of investment firm Piper Jaffray.
*Makers of security-software suites. Companies such as Zone Labs and Trend Micro are selling inexpensive suites of products. “Consumers realize you need more than anti-virus software” and are buying packages that include anti-spyware software and a firewall, Munster says.
*ISPs. Internet service providers such as AOL, Microsoft’s MSN and EarthLink have emerged as suppliers of basic anti-virus and anti-spyware protection for millions of their subscribers. They are offering security, in part, to keep subscribers.
To maintain its dominant market position, Symantec offers product suites. In October, it raised annual subscription rates 25% to 30% — a move that will add $250 million in annual revenue, Munster says. “Symantec is milking its (40 million to 50 million users) because most users would rather continue to pay for it than switch. … That is absolutely the right move.”
Enrique Salem, senior vice president of Symantec’s security products, says the price increase reflects more features in its products. “Consumers don’t want a lot of different products on their computers,” he says. “They’re just saying, ‘Protect me with one service.’”
McAfee, the market’s No.2 company with 15 million customers, decided in late 2002 that it needed to distribute its products to as many consumers as possible — even for lower profit. Since then, it has cut deals with Dell and Hewlett-Packard, the two largest PC makers, as well as AOL, Comcast and MSN.
“Our consumer distribution strategy has allowed us to grow faster than Symantec,” says Bill Kerrigan, executive vice president for McAfee’s consumer business. McAfee shares are up slightly, at $29.35, from a year ago.
(c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.