Microsoft Makes Biggest Move Yet into Anti-Virus with Sybari Acquisition

Microsoft has announced that it has signed definitive agreements to acquire Sybari Software Inc., a leading provider of security products that help more than 10,000 businesses worldwide protect their messaging and collaboration servers from viruses, worms, and spam. Microsoft will use this acquisition to further provide its enterprise customers with new solutions to help protect them from malicious software.

We are taking a positive stance on Microsoft’s expected acquisition of Sybari Software Inc. While Microsoft has made its interest in building out its security portfolio clear, the move to pick up Sybari, a company with a focus on enterprise customers, comes as a bit of a surprise. Microsoft is now poised to enter the anti-virus and broader messaging security markets even more quickly than anticipated, particularly with products targeted at the enterprise.

Microsoft began to signal its interest in the AV market several years ago. Shortly before the company announced its plans to acquire Romanian AV vendor GeCAD, it initiated the Antivirus Collaboration Service with several large players in the AV market. More recently, Microsoft announced plans to acquire anti-spyware vendor Giant Company Software. The company finally announced plans last month to release some initial security products.

Sybari is a good fit with Microsoft for several reasons. It is a long time Microsoft ISV partner that has always targeted protection of Microsoft environments. The company has its own robust partner network that includes Computer Associates, EDS, IBM, HP, Kaspersky Labs, NetIQ, Sophos, and Sun. Sybari fields a mature suite of products that provide protection from viruses, worms, and spam for Microsoft messaging and collaboration servers. Perhaps most importantly, Sybari claims that its products currently protect more than 10,000 businesses worldwide.

There is a philosophical concern with Microsoft’s move into the security market. There is an inherent conflict of interest in Microsoft benefiting from the sale of security products that are designed primarily to provide relief from the inherent insecurity of Microsoft’s operating systems and application software. It is therefore in Microsoft’s best interest to support a vibrant third- party security ecosystem. Microsoft clearly takes another view and sees the existing security market with its heavy emphasis on denigrating Microsoft products as a drag on its larger business growth.

The potential market impact of this move is not lost on anybody. Microsoft is poised to become an immediate player in the AV and content filtering markets. What is really interesting about the acquisition is that it positions Microsoft to lead its commercial entrance into the AV market with products targeted at enterprise customers. The conventional wisdom held that Microsoft would work its way up from the consumer market.

Sybari is a long time player in the market and has developed a mature suite of products that are well regarded by enterprise customers. At a higher, more strategic level, however, one must question the wisdom of Microsoft’s hard charge into the security market. Although, the existence of a robust ecosystem of third-party vendors provides Microsoft with a way to off-load some of the responsibility for security problems associated with its products.

Market Impact

• The potential impact of this acquisition should not be underestimated. And while Microsoft’s interest in the AV and broader messaging security markets comes as no surprise, the company’s decision to initially target the enterprise market is quite unexpected.
• Microsoft is likely to become an immediate force in the consumer and SMB markets. Competitors should expect increasing downward price pressure as Microsoft looks to aggressively build market share with both security software and services.

Vendor Importance

• At a tactical level, Microsoft needed to make this acquisition to better position itself with enterprise customers in the security market and to more quickly field a suite of messaging security products.
• More strategically, Microsoft seems to believe that much of the existing security market is built around the ability to belittle Microsoft and its products from a security perspective. The company wants to demonstrate that it can produce security solutions (as opposed to problems).