up to its old anticompetitive tricks again? If you believe Alex Eckelberry, CEO of Sunbelt Software, a privately owned purveyor of antispyware, the answer is a resounding yes.
"It's bad enough that Microsoft is getting into all aspects of security. But now they are going to kill their competition through
italics mine, Eckelberry said in his blog this week.
That's a serious charge. Predatory pricing has a fairly specific meaning: It is the practice of a dominant firm selling a product at a loss in order to drive some or all competitors out of the market.
Eckelberry, whose claim was widely circulated in the trade press, obviously knows this, and he went on to liken Microsoft's practices in the security market to Standard Oil's monopoly in the early part of the last century.
"We already know that Microsoft loses money on most of its business (it primarily makes money on the operating system). But now we see that Microsoft is endangering the entire security ecosystem with ruthless, Standard Oil-style pricing," he says.
Before looking at the pricing claim, it's worth noting that Eckelberry is wrong about Microsoft's business model. The software giant makes big bucks in many areas beyond the OS, including the Office franchise and its rapidly growing database business.
Eckelberry looks at retail pricing for
Norton Antivirus suite and
VirusScan, and concludes that Microsoft "has priced themselves almost 50% below the market leader, and no one has said a peep."
And looking at the enterprise market, Eckelberry concludes that Microsoft has undercut Symantec, McAfee and
by an average of 58%.
So, is Microsoft going back to court? Not likely. A foundation of antitrust law is the principle that competition benefits the consumer. And even a superficial analysis indicates that Microsoft is making the market more -- not less -- competitive.
Yankee Group analyst Andrew Jaquith calls the security market "a classic, clubby oligopoly in need of a shakeup."
As evidence, he says that Microsoft's OneCare gives home users permission to install the security software on three computers while taking out only a single license. But Symantec, for example, requires a license for each computer in the home.
"You've got to say that
Microsoft's pricing is consumer-friendly. There's a lot of room for pricing and packaging in the market, and the incumbents haven't done much -- except raise prices," he said in an interview.
Similarly, Gartner analyst John Pescatore said in an interview with
that "if the antivirus vendors had been reducing prices or increasing value, Microsoft would never have had the opening to move into the market. The antivirus vendors tried to keep margins high and sell more products every time a new threat came out."
And both analysts point out that everyone in the industry offers major discounts and bundling deals that make it difficult to compare prices head to head.
Microsoft didn't comment directly on the accusation but said through a company representative, "Our customers have made it clear that malicious software and other Internet threats represent a major problem, and they want Microsoft to deliver effective solutions.
"Microsoft believes that customers want the freedom to choose the security solutions that work best for them, and we're committed to seeing the sector stay competitive, with a large, thriving ecosystem of innovative companies," the company said.
Intel to the Rescue?
set to release new processors for the desktop, notebook and server computers in the next few months, hard-pressed investors in the storage industry may have something to look forward to. And not a moment to soon.
have lost 24% and 22% of their value, respectively, since early March, while
, which makes disks for hard drives, has slipped 17%, and
, which trades as an ADR, is off 8%.
The culprit? Soft PC demand, which still accounts for about three-quarters of the market for hard drives and related materials, says Baird analyst Daniel Renouard.
After talking to his industry sources, Renouard reports that system makers are apparently delaying component purchases until Intel's expected price cuts hit during the summer.
Meanwhile, pricing is once again "aggressive" as the drive makers respond to the soft demand and Seagate moves to hold on to as much of
business as possible, the analyst says.
Seagate CEO Bill Watkins said in an interview that he expects to lose about 50% of Maxtor's business, an estimate that Renoir called "a reasonable assumption."
CEO Larry Ellison put a scare into the open-source market earlier this year when he said that his company may develop its own version of Linux.
And because Oracle already has many customers who run its database on Linux, an "Oracle Linux" would likely be a formidable rival to products from
Oracle hasn't said much about its Linux plans recently, and some
analysts were inclined to think the company wasn't really interested. But asked about its aspirations in the Linux market during Oracle's earnings call Thursday, Ellison sounded mighty interested.
"The interesting thing about open source -- and I don't want to spend a lot of time on it today -- the interesting thing about open source is it's free to everybody, even Oracle," Ellison said.
"So, Oracle could choose to just take a copy of anyone's open source, and as long as we could support it better than an open-source company, we could suddenly leapfrog them and become the No. 1 distributor. It is free for us to take and support, which we may in fact, do in the future," Ellison said.