Talk of

McAfee.com

(MCAF)

expanding its relationship with

Microsoft

(MSFT) - Get Report

has been percolating for months, but details about just what that might mean are finally starting to trickle out.

In a recent research note, Paul Rodriguez, a managing director at Boston-based investment bank Fechtor Detwiler, wrote that Microsoft is in the process of forming a strategic relationship with McAfee to bundle the antivirus software maker's products with shipments of the Windows operating system. McAfee, a dot-com spinoff of

Network Associates

(NET) - Get Report

, sells security software online to consumers and small businesses.

Rodriguez said his sources -- which he described in an interview as "various industry channels" -- said the deal is expected to include both a bundling arrangement and hosting component. The deal was expected to have been announced by now, and technical integration has been completed, Rodriguez wrote.

"Obviously, it would be very positive for McAfee," Rodriguez said Wednesday. His firm hasn't done any banking with McAfee.

McAfee spokesman Woodrow Mosqueda said the company had no news to report and declined further comment.

Shares of McAfee fell 49 cents, or 3.1%, to close at $15.14 Wednesday. Shares remained flat in after-hours trading.

Rodriguez said he's heard that Microsoft has developed a sort of antivirus engine that allows for easier integration of any antivirus product. How the world's largest software maker would bundle that into Windows remains to be seen, he said, noting that the company will have to be very careful with the issue of "bundling," given its antitrust case still winding through court.

The deal would build on a relationship between McAfee and Microsoft that dates to May 2000, in which Microsoft offers free virus-scan services to Hotmail and MSN users. Microsoft also offers a service called McAfee Security Center on its messenger service in Windows XP, which gives users virus alerts and includes a link to sign up for McAfee products.

Not everyone, however, believes that the new alliance between Microsoft and McAfee will be quite as lucrative as Rodriguez suggests. "The upcoming deal with Microsoft is likely going to be good, but it's not going to be that good," said J.P. Morgan H&Q analyst Sterling Auty, who upgraded his rating on McAfee to long-term buy from market performer Friday. "I do not believe you're going to get a bundle relationship where McAfee receives a dollar amount with every Windows out the door." (His firm has had banking business with McAfee and Network Associates.)

Rather, Auty said perhaps McAfee will win a more prominent position in Windows beyond just a spot in the messenger service. "I think it's going to be a good deal for McAfee.com

and probably act as a catalyst for the stock," he said. "But it just may not be as huge as what some people speculated."

Analysts also disagree over what effect an expanded agreement between McAfee and Microsoft will have on competitor

Symantec

(SYMC) - Get Report

, best known for its Norton antivirus software.

A deeper alliance with Microsoft would likely be a negative for Symantec who has benefited as virus detection/prevention has proved to be one of the few pillars of strength in the software market in recent quarters, Rodriguez said. Symantec shares have been rewarded accordingly, its shares actually rising 10 cents since the beginning of the year on a split-adjusted basis, to close Wednesday at $33.66. Shares of McAfee have lost 56% of their value since the beginning of the year, while shares of its majority-owner Network Associates have dropped 20%.

Last month, Network Associates abandoned an effort to buy its spinoff after disclosing it is being investigated by the

Securities and Exchange Commission

and has to restate financial numbers calculated under previous management. Network Associates had cited a desire to expand in the consumer market as one reason for wanting to buy McAfee.

Todd Weller, an analyst at Legg Mason, said the Microsoft-McAfee deal may not make much difference to Symantec, however, because Symantec has locked up a number of PC manufacturers as partners. It's conceivable that a consumer who buys a new computer may be offered Symantec products via the PC manufacturer and McAfee products via Microsoft Windows, he said. Weller has a strong buy rating on McAfee and a market perform rating on Symantec. His firm hasn't done any banking business with either company.

Just about the only thing Wall Street analysts seem to agree on is that an announcement about the deal between Microsoft and McAfee is likely to arrive within the next two weeks.