Cyber Attack Raises Stakes for Tech

The cyber attack that recently hammered Web sites in the U.S. and South Korea underlines the massive threat still posed by hackers and viruses, even in an era of sophisticated computer security.

The denial-of-service attack tried to bring down the likes of the New York Stock Exchange and White House Web sites by bombarding them with requests from more than 100,000 infected computers dotted around the globe. This is not exactly a new phenomenon, although the scale and length of the assault was unusual, as government departments and federal agencies faced a sustained online onslaught.

By shining a spotlight on the gaps in PC security, though, the cyber attack could have major ramifications for the likes of Symantec ( SYMC), McAfee ( MFE) and Microsoft ( MSFT), which is quietly planning its own security revolution. Later this year, Microsoft will offer Security Essentials, a free consumer anti-virus product -- a major departure in a market driven by software subscriptions.

"We need home users to get decent protection on their computers," explains Graham Cluley, senior technology consultant for U.K.-based cyber security specialist Sophos. "That's one of the reasons why Microsoft is going to offer anti-virus software for free."

Symantec, which is making major enhancements to its paid-for Norton products, and McAfee, which is one of TheStreet.com's top tech picks for 2009, will soon be confronted with a very different competitive landscape.

"I would imagine that there will be some sleepless nights at McAfee and Symantec because Microsoft has amazing brand recognition," says Cluley. "In my mind, Microsoft coming out with free anti-virus software is very good because it cleans up more computers."

The software behemoth, which exited its recent third quarter with more than $25 billion in cash and investments, is certainly in a position to swallow a margin hit from its free software. Microsoft Security Essentials also offers a launch pad to sell additional software.

The media's obsession with cyber threats is keeping the issue of computer security firmly in the public eye, and that can only help Microsoft.

There is also the political will to tackle the online threats, potentially opening up a cash cow for tech companies. President Obama, for example, has promised to make cyber security a key priority for his government.

As for the recent events in Washington, fingers have already been pointed at North Korea as the source of the attack, which could explain why the U.S. and South Korea were targets. The image of Kim Jong-Il cackling deviously while hunched over a PC in Pyongyang, however, may ultimately prove wide of the mark.

"It's very hard to determine who is behind this because the hackers took over computers around the world," said Cluley. "It's just as easy for a kid in their bedroom to do this, as it is for an army."

In a world where an acne-ridden nerd can pose as big a cyber threat as The Great Leader, the need for digital security has never been higher. The question is whether consumers will still be willing to pay top dollar for anti-virus software when it becomes available for free. For companies like Symantec, McAfee, and Microsoft, the future is full of both massive risks and rewards.

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