Microsoft (NASDAQ: MSFT) is a giant in the computer industry with more than 90% of all the personal computers (PCs) in the world running on its Windows operating system (OS). This dominance has seen Microsoft become the company to beat in the bid to create the most popular operating system, but it is not without its pitfalls. As most computers run on Windows, it is only logical and economical that most programs are created to run on this OS. Consequently, most malicious software (which includes viruses, worms, Trojans, and spyware) are created to attack computers that run on the Windows OS. Over the past years, Microsoft has made efforts to tackle this problem on its own by releasing security updates and patches, and with the failed OneCare antivirus product. This year, it announced a free antivirus software called Security Essentials which was released in beta version on June 23, 2009. Considering the fact that Microsoft is giving this software away for free, what does this mean for it and for other security software vendors that offer their products at a price?

What Does It Mean For Microsoft?

1.       Better public image and increased goodwill: Microsoft has taken a beating over the years due to the perceived flaws in its OS. Its competitors have used Windows’ susceptibility to malware attacks as a launching point for their advertisements as to why their products are better. With this gesture of a free antivirus, the company is accepting responsibility for improving its products and trying to provide its customers with better value for less money. This move is one that could improve its reputation.

2.       Increased sales and better profits: Recently released earnings reports for the second quarter of 2009 showed decreased profits for Microsoft because of falling PC sales. More people are opting to buy other operating systems such as the Mac OS X (which is available only on Apple computers), and Linux distributions. Providing an improvement to its Windows OS at no additional cost is a good way to retain its customers and even gain new ones.

What Does It Mean For Other Security Vendors?

1.       Decreased product sales and earnings: If the free Security Essentials turns out to be as good as Microsoft says it is, most PC owners are likely to drop current antivirus products that they pay for. Companies such as Symantec, McAfee, Avira, Kaspersky, and etc which provide these subscription products will see a drop in sales which could lead to lesser profits.

2.       Increased competition from a larger company: In its current beta version, Security Essentials provides real-time malware protection where sites a user wants to visit are first routed through Microsoft’s servers to check them against known malware or phishing sites. Most security vendors do not currently offer this service. With Microsoft’s foray into antivirus software, these companies will be forced to improve their products to keep up with the competition and invariably will have to do so at increased cost.