Microsoft’s ‘Predatory’ Pricing in the Security Software Market (MFE, MSFT, SYMC)

We talked about Microsoft’s (MSFT) recent entry into the security software market a few weeks back. While we noted that Symantec (SYMC) and McAfee (MFE) appeared concerned, we also questioned whether consumers would pay Microsoft to defend against viruses and worms exploiting Microsoft’s one Windows operating system. It appears to create a moral hazzard for Microsoft - do they improve Windows or let it stay buggy so they can sell more security software?

Recently it became clear that Symantec and McAfee weren’t the only ones concerned. Some channel partners and competitors have vocally alleged that Microsoft is pricing its new OneCare suite at predatory levels.

Techdirt weighs in.

For some time there’s been concern about how Microsoft’s push into security software might square with its reputation (and conviction) as a monopolist…. There’s no doubt that Microsoft does want to take shots at its competitors — that’s what all businesses do. What’s funny though is that the argument boils down to the fact that OneCare is too good of a deal, that its licensing terms are too flexible, and that a software package of its caliber just shouldn’t be so affordable. All this sounds pretty good for consumers, whom the law should ultimately be designed to protect. If security software is such a commodity that price is the only concern for customers, then the price should be dropping.

In addition to the direct concerns about pricing, the company argues that Microsoft will establish a monopoly in the space, and that investment in new research and startups will dry up. One reason this isn’t likely is that security software doesn’t lend itself to a natural monopoly the way an OS does (not to mention the fact that the vaunted Windows monopoly itself is seen as weakening).

Besides, wasn’t the antitrust argument always that they were trying to kill competition so they could turn around and raise prices? How much did you pay for your last Internet Explorer download? Then, as soon as IE quit being adequate for many users, Firefox was developed.

No, we say to hell with the antitrust argument. The moral hazard is the more compelling case here.

MSFT-MFE-SYMC 1-yr comparison chart:

Comments

[peachin:]

MSFT offers a free 90 trial. It's price includes up to 3 computers - that's $15 per computer - it has been a problem using either McAfee, who decided to automatically charge me without my consent for the "next" year
and Symantec who tells you that you want to upgrade or you are exposed to other various sorts. let's look at MSFT in a better life - let's not always cast them negatively.

Funny when a company begins to breakout as a leader - by many furlongs - that they are evil. It's apple's turn now to take all the critical crap. When you are a winner - everyone wants you to get bloody. The attitude and energy of Sun Microsystems to "get" mr
softy is what will eventually put them out of business - they focused
on the wrong things.

2006 Jun 23 07:59 AM

[William Trent_:]

Paul,

Funny you should use that example. Here are my words from a few days ago:

2006 Jun 23 10:20 AM

[William Trent_:]

Sorry. The words were:

Apple (AAPL) is facing down a patent lawsuit. And sweatshop allegations. And a $100,000 fine. Now we know they are successful. They’re targets.

The post was at stockmarketbeat.com/bl.../

2006 Jun 23 10:22 AM

[peachin:]

yup! Apple and Mr. Softy and Intel - you'd think that AMD was going to run by Intel the way they have been cast as the speedster in chips. AMD assures Intel that Intel's "gathering" of technology thru small acquisitions will not be cast as monopolistic. You'd think that Apple, Mr. Softy and Intel are our prior market leaders but in the future they might have Poloroid
written all over them. Of course and on the other hand I feel that Dell might be the tombstone next to Gateway in the next 5 years. William Trent thanks for your daily posts and i love seeking Alpha.

2006 Jun 23 12:45 PM

[William Trent_:]

Thanks for the kind words.

2006 Jun 23 10:30 PM