Is Microsoft Security Pricing Predatory?

Allegations of "predatory pricing" are beginning to swirl around Microsoft's emergence as a player in the security software space.

Allegations of "predatory pricing" are beginning to swirl around Microsofts emergence as a player in the security software space.

On the heels of the software makers May 30 release of its Windows Live OneCare PC care bundle for consumers and a massive rebranding effort in the enterprise security sector, competitors are crying foul, charging that Microsoft is using its financial clout to kill competition and stifle innovation.

Alex Eckelberry, president of enterprise anti-virus vendor Sunbelt Software, went on the offensive in his companys blog, with a June 21 post that accused Microsoft of "endangering the entire security ecosystem with ruthless, Standard Oil-style pricing."

While its too early to see how a potential price war would impact enterprise technology spending, Microsofts entry into the market may give enterprises leverage to squeeze incumbent security companies. A Merrill Lynch survey of 50 chief information security officers released June 20 found that Microsoft was rated the No. 3 vendor most strategic to IT security, behind only Cisco and McAfee.

Accusations of predatory pricing and unfair competitive practices could spur regulators in the United States and abroad to investigate Microsofts tactics, and Eckelberry suggests that the Federal Trade Commission take a serious look at the way the Redmond, Wash., company has priced its products far below fair market value.

Eckelberry charged that predatory pricing is being used as a competitive weapon to drive weaker competitors out of the market.

In an interview with eWeek following the publication of his blog entry, Eckelberry said he was "astonished" to find that Microsofts pricing for the Antigen e-mail security suite was more than 50 percent below similar products from rivals Symantec, Trend Micro and McAfee.

"They are lowballing the entire market," he said in Clearwater, Fla.

For Windows Live OneCare, a consumer application that includes anti-virus, anti-spyware, firewall and data backup features, Eckelberry said Microsoft pricing was 29 percent to 44 percent less than pricing for competitors products.

"We dont know what Microsoft plans to price Forefront Client Security, but one can assume from their pricing here its going to be ruthless. What should be disturbing about all of this is that we very well might see Microsoft owning a majority in the security space," Eckelberry said.

In a statement released to eWeek, Microsoft took a small swipe at incumbent security vendors, insisting that its entry into the market is driven by the fact that a segment of its customers remain unprotected.

"[The] market is full of opportunity for all security vendors to play a role in customer security," Microsoft said in the statement. "Microsoft believes that customers want the freedom to choose the security solutions that work best for them, and were committed to seeing the sector stay competitive, with a large, thriving ecosystem of innovative companies."

David Moll, CEO of privately held anti-spyware vendor Webroot Software, threw his weight behind Eckelberrys concerns, arguing that Microsofts pricing policy is "consistently out of line with the rest of the industry."

"It will be interesting to see the response from the regulatory authorities here and in Europe," said Moll in Boulder, Colo.

"I expect this to be a bigger issue as Microsoft starts rolling out their product lines. Well be evaluating our [legal] options here in the U.S.," he added.

John Pescatore, an analyst at Gartner, said Eckelberrys numbers dont paint an accurate picture of the way anti-virus software is priced, particularly at the retail level.

Pescatore said Sunbelts comparison of the Windows Live OneCare pricing structure—three computers for $49.95, or $16.95 per user—with the cost of competing products fails to take into account the major rebate programs offered by market leaders Symantec and McAfee at the retail level.

"The other anti-virus companies had three-user pricing that was not as attractive because they were trying to get consumers to buy three separate copies to make more money. Symantec and McAfee never priced aggressive in retail store sales," said Pescatore in Silver Spring, Md.