Security Software Worlds Collide

The combination of stock-option probes, a subpar first quarter and a jumbo-sized threat from Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) have weighed on the security software sector for the past few months.

Now, companies such as Symantec (SYMC Quote - Cramer on SYMC - Stock Picks) and McAfee (MFE Quote - Cramer on MFE - Stock Picks) are gearing up to launch their latest consumer products, hoping to attract new business -- and spark their floundering stocks -- while keeping current customers from being seduced by the Redmond, Wash., behemoth at the same time.

There is still ample opportunity to gain market share in the consumer business. Fewer than half of computer users have an active subscription to antivirus software.

While it's difficult to predict which company is likely to benefit most from the looming battle for consumer dollars, those firms that can best attract customers with attractive pricing and innovation while fending off Microsoft -- and post better quarterly numbers -- should reward patient investors.

Security stocks have been essentially inert for the past nine months as investors have been unimpressed with lackluster earnings results and various other missteps.

Though McAfee beat the Street's predictions in the last quarter, what little gains the stock made from the positive quarter were offset by the stock-options issue.

Meanwhile, Symantec shares have yet to show the benefit from its merger with Veritas last year. The stock dropped off 26% in November after the company reported a weak September quarter, and the shares haven't been able to recover the loss since.

Game On

Microsoft launched Windows Live OneCare at the end of May, ahead of the two entrenched security firms. The debut gives the company "a chance to gain a foothold in the market," says Jonathan Singer, an industry analyst with Yankee Group.

At the same time, "Now that it's out, it's no longer a ghost," says Daniel Ives, an equity analyst with Friedman Billings Ramsey. "I think that's going to lessen some of the uncertainty in the space."

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