Selling antivirus against Microsoft, the company will rely on a more complete product line. Selling enterprise anti-spyware against Symantec, the company will rely on its manageability, Samenuk indicated.
He spoke to analysts as McAfee reported its fourth-quarter sales and 2005 projections, seeking to portray the company as the acknowledged leader in the hottest growth segments of the security industry.
Revenue for the quarter reflected divested businesses and was down 10% year on year at $244.5m. The company did not disclose its net income for the fourth quarter to December 31, pending an evaluation of taxes due. Pre-tax, profit was $24m.
McAfee stuck to estimates for the current quarter, but guided higher for the full year. The firm said it expects revenue between $920m and $960m, and earnings per share of $1.10 to $1.15. Analysts were expecting income of $1.04 per share on $860m revenue.
The hot growth drivers will be host and network intrusion prevention systems and vulnerability management, Samenuk said, both of which McAfee acquired its way into over the last two years, supplementing its core antivirus business.
This product diversity means Microsoft’s looming entrance into the antivirus market, which has been widely expected for almost two years, will not have as big an impact on McAfee as it once could have, even if Microsoft low-balls on price.
This is not a surprise, we’ve been anticipating Microsoft’s move into security for over two years now, Samenuk said. He added that the industry has now changed, and that customers know that reactive antivirus is just not enough.
Microsoft bought GeCad Software, an antivirus developer, in June 2003, giving it the potential to enter desktop antivirus. It acquired Sybari Software earlier this month, allowing it to enter the antivirus gateway market, protecting Exchange and Notes.
While Microsoft is now a competitor in antivirus, it has yet to make its presence fully felt. But in the anti-spyware market, where McAfee and Microsoft are entering at about the same time, Microsoft has already said it will undercut rivals on pricing.
Currently, McAfee plans to sell anti-spyware as a separate product in both the enterprise and consumer segments. Microsoft will give its recently acquired anti-spyware capability away for free, but has not yet talked about enterprise plans.
Samenuk said Microsoft’s move will not change current pricing plans. I’m not going to sit here and speculate what Microsoft will deliver in the marketplace, what pricing it will have, or what the impact on the market will be, if any, he said.
Symantec is going to make its enterprise anti-spyware functionality, which will be delivered next week, at the same time as McAfee’s equivalent, available to antivirus customers at no added cost.
While McAfee executives have previously indicated in interviews that the pricing models of Symantec and McAfee may have some impact down the line, Samenuk said yesterday that McAfee has no plans to immediately follow suit.
What we’ve heard from corporate customers is that they want anti-spyware to be as easily managed as antivirus is with ePolicy Orchestrator, and that they’re willing to pay for it, Samenuk said. ePO is McAfee’s enterprise management suite.
While Microsoft acquired its way into McAfee’s stomping ground, McAfee acquired its way out of it, picking up Entercept and IntruShield products for host and network IPS, and Foundstone Software for vulnerability management.
Samenuk said that IPS and vulnerability management are getting McAfee into accounts even when the customer already uses antivirus from a competing vendor. He thinks ePO is helping the firm gain enterprise market share.
The company picked out IntruShield as a performer in the fourth quarter. Bookings grew 70% year on year, and revenue grew 55%, McAfee said. That compares to overall revenue growth, excluding divested businesses, of 28%.
Some of this growth was driven by 3Com Corp’s disruptive acquisition of TippingPoint Technologies, a key IntruShield competitor. Samenuk said this disruption gives McAfee an opportunity to sell more IPS.
Whenever a business gets sold there is some disruption, he told analysts. He later added: We believe we have a short term opportunity to increase IntruShield because of the disruption from the competitors.
When TippingPoint was a standalone company they sold a lot for free or very low margins, Samenuk said. I believe the new acquirer doesn’t have the freedom to give away for free or to get deeper margins.
McAfee also said that it will delay the filing of its 10-K annual results regulatory filing because it is having problems fulfilling section 404 of the Sarbanes-Oxley act, which requires public companies to maintain strict controls over their accounting systems.
Ironically, it is SOX 404 that many security companies hope will drive their businesses this year, the reasoning being that to control your accounting system you need to have security systems protecting them.
