Microsoft Security Pricing: Predatory or Correctional?

News Analysis: Allegations of "predatory pricing" are beginning to swirl around Microsoft's emergence as a player in the security software space. Is Redmond stifling competition or helping to correct an overpriced sector?

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 giants release of its Windows 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 on his companys blog, accusing Microsoft of "endangering the entire security ecosystem with ruthless, Standard Oil-style pricing."

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 FTC (Federal Trade Commission) take a serious look at the way Redmond has priced its products way below fair market value.

He 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 rivals Symantec, Trend Micro and McAfee.

"They are low-balling the entire market," he said.

For Windows OneCare, a consumer application that includes anti-virus, anti-spyware, firewall and data backup features, Eckelberry said Microsoft was coming in between 29 percent and 44 percent lower than incumbents.

"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 of this all 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 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," the company said.

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," Moll said in an interview with eWEEK.

"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, research director for Internet security at Gartner, says Eckelberrys numbers doesnt paint an accurate picture of the way anti-virus software is priced, particularly at the retail level.

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Pescatore said Sunbelts comparison of the Windows OneCare pricing structure--three computers for $49.95, or $16.95 per user--to 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," Pescatore said.

Next Page: Rebate programs, bundling deals.