Microsoft Buys Antispyware Maker

In yet another move in the consolidating computer security sector, Microsoft(MSFT) on Wednesday acquired privately held Giant Company Software, a maker of antispyware software.

The acquisition of Giant is another step by Microsoft into the security space, following Microsoft's acquisition last year of Romanian antivirus software maker GeCAD Software. That earlier acquisition raised concerns about Microsoft entering the antivirus market, the sweet spot for security maker Symantec(SYMC). Industry watchers have said that threat from Microsoft has led Symantec to acquire companies in other fields, including storage with its acquisition of Veritas(VRTS), also announced Thursday.

Similarly, analysts suggested Thursday that Microsoft's Giant acquisition could encroach on the business of security vendor McAfee(MFE). In a note Thursday, Wedbush Morgan Securities analyst Kevin Trosian highlighted the potential pressure of the Microsoft news on McAfee, which he described as an early leader in antispyware among public companies. (Trosian has a buy rating on McAfee, though he removed the stock from the firm's focus list on Wednesday because he believes the company's turnaround has been priced into the stock. His firm hasn't done banking with McAfee.)

Indeed, shares of McAfee recently sank $3.93, or 12%, to $28.78. Shares of Microsoft edged up 16 cents, or 0.6%, to $27.27.

McAfee also has been rumored to be a potential acquisition target for Microsoft, although the world's largest software maker has avoided such big deals in recent years. Even with Thursday's slide, McAfee still has a market cap of more than $4 billion.

Microsoft did not disclose the terms of the Giant deal or the size of New York-based company. Amy Carroll, director of Microsoft's security business and technology unit, stressed that Microsoft viewed the deal as a technology acquisition and said fewer than a dozen Giant employees will be relocating to Microsoft's Redmond, Wash., headquarters.

Microsoft plans to make a beta version of a spyware protection, detection and removal tool based on Giant's product within a month. That beta product will be available for free to all Windows customers who own versions 2000 or later, Carroll said.

Microsoft hopes to have a final version of the product available by next summer, Carroll said. Microsoft has not yet disclosed pricing on that final product.

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