The Right Partnerships Can Drive McAfee’s Stock

Includes: CA, MFA, SYMC
by: Trefis

McAfee (MFE) competes with Symantec (NASDAQ:SYMC), CA, AVG, TrendMicro and Kaspersky Labs in the antivirus software market. The company has increased its antivirus market share over the last few years and we believe increasing partnerships with PC makers and Internet Service Providers (ISP) will drive future antivirus market share gains for McAfee.

McAfee’s Market Share Expected to Increase

We estimate that the anivirus software business constitutes about 33% of the $35 Trefis Price estimate for McAfee’s stock. McAfee’s antivirus market share has increased from 16% in 2005 to 20% in 2009 and we expect it to increase to 21% by the end of Trefis forecast period. In comparison, McAfee’s main competitor, Symantec, has been losing market share but still leads the market with about 50% share.

If McAfee were able to increase its market share at a rate in-line with recent historical rates, it share would reach 27% by the end of our forecast period, implying an upside of 10% to the $35 Trefis price estimate for McAfee’s stock.

Partnerships Will Drive Market Share Gains

We believe that McAfee’s partnerships will play a crucial role in determining how the company’s antivirus market share trends.

1. Increasing Partnerships with PC Makers

McAfee’s strategy has been to keep its antivirus pricing low, which has helped it win strategic partnerships with PC makers in the past. McAfee’s past deals include partnerships with HP (NYSE:HPQ), Acer, Dell (NASDAQ:DELL), Sony Computer (NYSE:SNE) and Toshiba (OTCPK:TOSBF).

McAfee is included on more than 50% of the PCs shipped by the top 10 PC makers. McAfee’s higher unit market share, however, is offset by lower pricing which is the reason why it has only about 20% market share of the revenues earned from antivirus sales.

2. Increasing Partnerships with Internet Service Providers

McAfee has partnered with major ISPs like AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), Verizon (NYSE:VZ), AOL and Cox to provide security as part of their internet services to consumers. AT&T, Comcast and Verizon are the leading broadband service providers in the US in terms of market share and provide McAfee access to a large target consumer base.

You can modify our forecast for McAfee share in the antivirus market above to see how McAfee’s stock could be impacted if its share were to increase at a faster rate than what we forecast.

Disclosure: None