Ever since

Microsoft

(MSFT) - Get Report

acquired an antivirus company nearly a year ago, analysts have been casting the software behemoth as a dark cloud threatening to rain on the booming sector's parade.

Microsoft did little to allay worries of a coming storm in the antivirus field at a presentation in Silicon Valley Thursday afternoon. Rich Kaplan, corporate vice president of security business and technology marketing, said Microsoft remains on the fence about its plans for the technology it acquired with the purchase of Bucharest, Romania-based antivirus maker GeCAD Software last June.

"We haven't decided yet how and if we will integrate that technology," Kaplan told a group of roughly 100 people at a presentation on Microsoft's security. In the near term, Microsoft is focused on partnering with other antivirus vendors, including

Computer Associates

(CA) - Get Report

, to improve security in the release of its Windows Service Pack 2 this summer.

Earlier this week, though, Microsoft announced a partnership with

Hewlett-Packard

(HPQ) - Get Report

, the second-largest server vendor, to bundle its firewall and virtual private network. That move encroaches on the domain of

Check Point Software

(CHKP) - Get Report

and

SonicWall

(SNWL)

, and could bode ill for other security vendors if Microsoft duplicates that model in the antivirus field.

Microsoft's entrance into the antivirus market would pose the greatest threat to companies like

Symantec

(SYMC) - Get Report

and

Network Associates

(NET) - Get Report

. Symantec, in particular, has enjoyed quarter after quarter of stronger-than-expected results as a result of its seemingly unstoppable consumer antivirus business, and its stock has doubled in the past year.

Shares of Network Associates, which has been grappling with financial restatements and problems in its corporate security business, have still outperformed the

Nasdaq Composite

in the past year, climbing 36% compared to a 31% increase in the Nasdaq.

Shares of Symantec were recently off 32 cents, or 0.7%, while Network Associates was up 9 cents, or 0.5%, at $16.62. Microsoft was down 3 cents, or 0.1%, to $26.16.

As a result of Microsoft's circumspect public attitude, analyst and investor opinion about whether Microsoft will enter the antivirus fray remains all over the map.

"I think there is a very strong likelihood they're going to do it on the antivirus side," said Joel Fishbein, an analyst with Janney Montgomery Scott, who noted Microsoft has been hiring security software engineers for the past six months.

But Fishbein said Microsoft may not offer antivirus ware until it releases its next operating system, Longhorn, now not slated until 2006. If that happens, "people won't pay the same multiple for Symantec as they once would," he predicted.

The one uncertainty, Fishbein acknowledged, is whether the monopolist would raise more antitrust concerns by selling antivirus software. He has buy ratings on both Symantec and Network Associates. (His firm hasn't done banking with either company.)

Schwab SoundView Capital Markets analyst Walter Pritchard believes regulatory hurdles would be high enough to block Microsoft. Rather than competing head-on with Symantec and Network Associates, he believes Microsoft could fight viruses through what he called "behavior blocking." Using that approach, Microsoft could build in code that blocks common virus behavior such as sending out hundreds of emails to people in a person's address book, he explained.

Noting Symantec's more than 50% sales growth last year, Pritchard said a bigger risk to the antivirus market than Microsoft is a slowdown in sales. He remains bullish on the companies, though, with outperform ratings on both Network Associates and Symantec. (His firm doesn't do investment banking with either company.)

Chris Bonavico, a portfolio manager with Transamerica Investment Management, said he believes another reason Microsoft will not jump into the space is because security is a services business that requires around-the-clock responses to new attacks, and Microsoft isn't a services company. Bonavico, who holds Network Associates rather than Symantec because he believes there are fewer expectations priced into the stock, also suggested companies would be more confident in a third party offering security than Microsoft itself.

Not surprisingly, most analysts agree that even if Microsoft does begin selling antivirus products, the world's largest software maker may for once face an uphill battle in the enterprise market. That's because of the bad rap it has earned after releasing patch upon patch to fix holes in its software.

"Will Microsoft become the dominant security vendor? I only think this is likely through partnership," said Wedbush Morgan Securities analyst Kevin Trosian, who has a neutral rating on Symantec and a buy rating on Network Associates. "That's the only strategy that is going to be able to work for Microsoft in security for a while -- at least for a few years." (His firm hasn't done any banking with Symantec or Network Associates.)

"There's no trust with Microsoft right now on the security issues," Trosian explained. "People kind of roll their eyes when Bill Gates talks about their security issues."

But in the end,

heads

may roll in the security space if Microsoft makes a big push into the antivirus sector.