Computer virus downloads

Microsoft Buying Anti-Virus Software Maker

SEATTLE (Reuters) - Microsoft Corp. said on Tuesday it would buy anti-virus software maker Sybari Software Inc. in a direct challenge to Symantec Corp. and McAfee Inc., which currently dominate that market.

If Microsoft, the world's largest software maker, bundles anti-virus features into its Windows operating system, security software makers could feel the pressure, analysts said.

"Microsoft's acquisition of Sybari will get them into the (business) anti-virus market specializing in e-mail protection, a negative for Symantec and McAfee," said Sterling Auty, an analyst with JP Morgan.

McAfee shares were down 8.55 percent, or $2.24 to $23.72 in afternoon trade on the New York Stock Exchange. Symantec, which recently bought storage software company Veritas to diversify and reduce its dependence on security, was down 5.64 percent or $1.33 to $22.27 on the Nasdaq.

Mike Nash, vice president at Microsoft's security business unit, declined to say how much Microsoft paid for Sybari, but according to regulatory documents filed by the company in preparation for a public offering, Sybari had valued itself between $163 million and $182 million.

"We paid an amount that was very good for them and good for us," Nash said.

Sybari, based in East Northport, New York, develops software that protects e-mail systems from worms and viruses, as well as spam, or unsolicited e-mail.

Sybari, which says it has more than 10,000 customers, specialized in creating security software for Microsoft Exchange and Lotus Notes, used to direct e-mail traffic between users and the Internet.

Nash said there were no plans to immediately bundle Sybari's software into own products, but instead the company would continue offering its own products, including security for Lotus Notes.

In January, Microsoft began offering free downloads of a trial anti-spyware software, which blocks programs that generate unwanted pop-up ads and secretly record a computer user's activities. That software was based on technology acquired when Microsoft bought Giant Company Software Inc. in December.

Sybari filed last year to go public. In its latest filing in January, the company said it might sell 3.35 million shares at $14 to $16 each in an initial public offering. It said it had revenue of $34.1 million and a loss of $2.6 million in the first nine months of 2004.

Microsoft shares were up 11 cents at $26.27 the Nasdaq.