NEW YORK (CNN/Money) -
Microsoft Corp. has been called many names over the years, including a predatory vampire by an MIT economics professor during the software maker's landmark antitrust battle with the U.S. government.
Well, Microsoft is now taking a foray into the land of Dracula, scooping up the intellectual property and technology assets of Bucharest, Romania-based GeCAD Software, which develops anti-virus software.
Microsoft, which announced the deal June 10, said it will use GeCAD's technology to develop its own anti-virus products but did not give specifics as to when they would be available.
Scared? Not us!
But the funniest thing about the deal wasn't the numerous jokes you could make about Bill Gates wanting to suck the technology sector's blood. It was watching how the big anti-virus software firms rushed to proclaim that they weren't worried by this development.
"While we still need to understand the full implications of this announcement, we applaud Microsoft's efforts to develop an operating system upon which anti-virus vendors can build more effective protection," said Symantec, which sells the Norton brand of anti-virus software.
Japanese anti-virus software company Trend Micro (TMIC: Research, Estimates) said, "Trend Micro's vision is to create a world safe for exchanging digital information and this move by Microsoft will help to accelerate Trend Micro's goal."
And Panda Software, a closely held anti-virus software company based in Spain, issued a statement with the following headline "Panda Software Welcomes Microsoft Initiatives for Improved Computer Security."
These tame responses to Microsoft would be like Saddam Hussein issuing the following statement back in February: "Iraq welcomes the massive presence of the U.S. military in the Middle East. We applaud the U.S. for its efforts to support world peace, a vision that Iraq shares."
Of course, you don't expect companies to issue statements saying they're terrified. But the fact that Microsoft is entering their business isn't exactly something to celebrate.
"The age-old reaction to Microsoft doing something is 'It's not going to bother us,' but when Microsoft decides to turn up the heat, you really do have to watch out," said Pip Coburn, global technology strategist for UBS Warburg.
Where's Buffy when you need her?
Investors certainly seemed scared the day of the announcement.
On an up day for the overall market and tech stocks in particular (the Nasdaq gained 1.5 percent), shares of Network Associates (NET: Research, Estimates) sank 1.3 percent while Symantec (SYMC: Research, Estimates) dropped 1.5 percent. Microsoft (MSFT: Research, Estimates) gained nearly 4 percent. Network Associates sells the popular McAfee anti-virus software.
To be sure, it will be some time before Microsoft has its own anti-virus offering on the market. And it's uncertain if the company will decide to sell them as separate products or bundle them in with future versions of Windows.
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Furthermore, there's no guarantee that a Microsoft product would mean the end of Norton or McAfee. Several niche software companies -- Adobe and Intuit are but two examples -- have thrived despite direct competition from Mister Softee.
But Richard Williams, strategist with Summit Analytic Partners, an independent research firm focusing on software companies, said the Microsoft threat is real.
"It could be Netscape all over again," Williams said, referring to how Netscape, now owned by AOL Time Warner, went from being the No. 1 Internet browser to a non-factor after Microsoft decided to bundle its own browser with Windows. AOL Time Warner also owns CNN/Money.
If nothing else, Williams adds, the eventual presence of Microsoft in the anti-virus market should cause investors to take a closer look at Symantec and Network Associates, which he thinks are overvalued.
Symantec trades at 27 times fiscal 2004 earnings estimates even though earnings are expected to grow just 10 percent this year and next year. Network Associates trades at 23 times 2003 earnings estimates but analysts expect earnings to fall 14 percent this year.
These earnings estimates, mind you, don't factor in any potential impact from Microsoft entering the market.
And unfortunately for Symantec and Network Associates, they'll need more than garlic and a wooden stake to fend off Bill Gates & Co.'s anti-virus efforts.
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