Microsoft Unveils Anti-Spyware Tool

The move spurs speculation about the software titan's move into the sector.
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Microsoft

(MSFT) - Get Report

launched a new, free anti-spyware product Thursday and announced plans to release a virus removal product next week, spurring more speculation about when the software behemoth will jump full force into the security market.

Based on technology

acquired last month from Giant Company Software, the first beta of the anti-spyware software detects and removes spyware and improves Internet browsing safety, according to Microsoft.

In addition, Redmond, Wash.-based Microsoft said a new, free tool to remove malicious software -- developed from technology acquired from a Romanian firm in 2003 -- will be available Jan. 11. The tool removes viruses or worms that already have infected a computer and will be updated the second Tuesday of each month.

Microsoft, whose Windows software is a huge target of virus and worm attacks, said the virus removal tool is designed to augment anti-virus solutions from other companies such as

Symantec

(SYMC) - Get Report

and

McAfee

(MFE)

that provide more complete coverage. Microsoft's removal tool doesn't protect against a new virus attacking a system.

But Microsoft is widely expected to launch and charge for a broader competing anti-virus product this year -- a threat that has added to pressure on Symantec stock since the company announced its merger with

Veritas

(VRTS) - Get Report

last month.

Shares of Symantec, which was downgraded by one analyst and upgraded by another Thursday, recently dropped $1.54, or 6.2%, to $23.50. Rival McAfee also suffered a hit, shedding $1.16, or 4.4%, to $25.47 in recent trading. Shares of Microsoft were up a penny at $26.79.

Wedbush Morgan Securities analyst Kevin Trosian wrote Thursday that Microsoft may launch a competing anti-virus product as early as February or March -- months earlier than other predictions. However, Trosian said he doesn't expect Microsoft to affect the consumer anti-virus market for the next 12 months or the enterprise anti-virus market for at least 18 to 24 months.

(Trosian has buy ratings on Symantec and McAfee; his firm hasn't done investment banking with either company.)

Friedman Billings Ramsey analyst Nitsan Hargil echoed that sentiment, saying he expects Microsoft's entry into the consumer anti-virus market to be gradual and mild. Hargil, who raised his Symantec rating to outperform from market perform Thursday, called Microsoft's anti-spyware and anti-virus announcement "more bark than bite."

"We remain unconvinced as to MSFT's security credentials, and as a matter of fact, believe that many customers see MSFT as the source of many security issues," Hargil added. (His firm hasn't done banking with Symantec.)