NEW YORK (CNN/Money) -
Between last week's dreaded Blaster worm and the latest incarnation of the highly disruptive SoBig worm that's currently clogging e-mail boxes, you'd think that the shares of anti-virus software companies would be soaring.
But that hasn't been the case. Symantec and Network Associates, which sell the popular Norton and McAfee anti-virus software products respectively, have headed higher but not dramatically so.
Shares of Symantec (SYMC: Research, Estimates) are up about 3 percent this week while Network Associates (NET: Research, Estimates) has popped 6 percent.
"The stock reaction is muted considering how big these problems appear to be," said Richard Williams, strategist with Summit Analytic Partners, an independent research firm focusing on software.
Williams said that investors might be assuming that most big business, which have been reluctant to make large software purchases during the past few years, may already have anti-virus products in place and won't be prompted to spend on more just because of the latest rash of worms and viruses.
But Alan Weinfeld, an analyst with Fulcrum Global Partners, said that both companies should benefit from increased spending on anti-virus products this quarter, which ends in September for both companies.
Recent history backs that up. In the calendar second quarter of 2000, for example, both Symantec and Network Associates reported stronger-than-expected results, due in part to fears raised by the ILoveYou e-mail bug in May of that year.
And in the calendar third quarter of 2001, both companies reported better-than-expected earnings despite the Sept. 11 terrorist attacks. That's because the Code Red and Nimda worms both infected computer systems that quarter.
To be sure, analysts have yet to raise earnings or sales estimates for either company just yet. That will be one thing to keep an eye on in coming weeks. Neither stock trades at a prohibitively expensive valuation so investors may not be banking on earnings estimate upgrades.
Network Associates trades at about 21 times 2003 earnings estimates, with an estimated long-term growth rate of 17.5 percent. Symantec trades at 25.5 times estimates for this fiscal year, which ends in March 2004, and earnings are expected to increase at a clip of about 17 percent.
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Still, one small stock already has seen a big boost thanks to the newest variation of the SoBig worm. Tumbleweed Communications (TMWD: Research, Estimates), which has developed an e-mail firewall product to block spam and viruses, has shot up nearly 20 percent this week.
Tumbleweed has more than 600 customers, mainly financial services firms, health-care companies and the government. But the stock is a more speculative bet than Network Associates and Symantec. Tumbleweed has a market value of just $133 million and is not expected to post a profit this year.
Analysts quoted in this story do not own the stocks mentioned and their firms have no investment banking relationships with the companies.
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