Microsoft to buy Sybari

By Reed Stevenson

SEATTLE - Microsoft Corp. said on Tuesday it would buy anti-virus software maker Sybari Software Inc. in its second such deal in three months to shore up security in its Windows and e-mail software, which are the most frequent targets of malicious programmers.

News of the deal sent shares of McAfee Inc. and Symantec Corp., which currently dominate the security market, lower.

Security is a rising concern and a booming business in technology, and Microsoft has devoted increasing resources to it over the past three years.

If Microsoft, the world's largest software maker, bundles anti-virus technology into its software for directing the flow of e-mail traffic, security software makers could feel the pressure, analysts said.

Analysts, however, have cautioned that Microsoft is years away from building a trusted security product after long-time troubles protecting its widely used Windows operating system from viruses.

"Microsoft's acquisition of Sybari will get them into the (business) anti-virus market specializing in e-mail protection, a negative for Symantec and McAfee," said Sterling Auty, an analyst with J.P. Morgan.

McAfee shares closed down 8.2 percent, or $2.14, at $23.82 on the New York Stock Exchange. Symantec, which recently bought storage software company Veritas to diversify and reduce its dependence on security, finished 6.4 percent, or $1.51, lower at $22.09 on Nasdaq.

Redmond, Washington-based Microsoft also issued on Tuesday its monthly security bulletin, warning computer users of eight new "critical"-rated flaws in its Windows, Office and other software products that could allow hackers to sneak into personal computers and snoop on sensitive data.

SECURITY INITIATIVE

Three years ago, Microsoft launched a major initiative to improve the reliability and security of its software.

Such efforts, however, have spooked investors in security software companies.

Symantec and McAfee, companies that have built businesses around combating many of the viruses written for Microsoft software products, both dismissed Microsoft's announcement at a Merrill Lynch conference in Santa Monica, California, on Tuesday.

"We think it's interesting in that Microsoft keeps nipping around, but (the acquisition) is probably not market shaking," said Greg Myers, Symantec's chief financial officer, at the conference.

George Samenuk, McAfee chairman and chief executive, said he believed Microsoft's purchase of Sybari would not undercut his company's growth prospects.

"This is inconsequential to our revenue at McAfee ... We see it as a nonevent," he said about McAfee.

MORE ACQUISITIONS?

The purchase of Sybari was the third major security software-related acquisition for Microsoft in the last few years.

"We paid an amount that was very good for them and good for us," said Mike Nash, vice president at Microsoft's security business unit.

Sybari, based in East Northport, New York, develops software that protects e-mail systems from worms and viruses, as well as spam, or unsolicited e-mail.

Sybari specialized in creating security software for Microsoft Exchange and Lotus Notes, used to direct e-mail traffic between users and the Internet.

In January, Microsoft began offering free downloads of a trial anti-spyware software, which blocks programs that generate unwanted pop-up ads and secretly record a computer user's activities.

That software was based on technology acquired when Microsoft bought Giant Company Software Inc. in December.