Symantec's battle with Microsoft -- Is it just whining?

Doug -- not a very in-depth blogging analysis, methinks. Symantec's stock is up in the near term, but it was cut by greater than 60% in the year and a half following the company's merger with Veritas. Included in that decline was the fact that Microsoft, which has its hands in every software business known to man, is going after the security market now, too. That in light of the fact that the Microsoft OS has so many holes in it you could drive Bill Gates' Humvee through. The issue regarding Microsoft getting into the security business is a complex one. Frankly, your little blog entry addresses almost none of the issues. The most important rests on the relationship between a third party software developer (like Symantec or Adobe) and the OS developer (like Microsoft and Apple). A software developer, a publicly traded country with billions on the line, is faced with dependencies on the OS developer in nearly every aspect of its work. Every time the OS developer decides that it's going to attack the market of the third party software developer - who is making the software that makes the OS more useful - there are bound to be implications. First and foremost, access to critical information about the OS technology to allow the software to work, and/or work well. Now that Microsoft is competing with Symantec, and McAfee, Trend, etc., do you think they're going to provide the same level of information and access to their competitors? Knowing how Microsoft behaves in competitive situations? The answer, Doug, is no. And that is a huge competitive issue. It is what the FTC and anti-trust legislation should be there to manage; but of course, the American trade legislators haven't lifted a finger in the 6 years of the Bush Administration. Have they ever stopped a merger, or stepped in for competitive reasons? Does that mean that in 6 years no company has engaged in predatory or non-competitive practices? I don't think so. Are you really so naive to believe that Microsoft, with no oversight in America and a track record a mile long of unfair competition, would be model citizens knowing that they have an FTC that will never lift a finger? This is why some of America's most successful companies need to go to Europe to get appropriate oversight on competitive issues. Think that's good for these companies, fair competition, or the American economy? I would say, no. A little more complicated than seeing that the stock is up in the last three months and Barron's thinks the company is on the right track. That's great. But it's important for Symantec and other companies also to raise awareness of these issues, especially given that no governing body in America would lift a finger even if a multi-billion dollar international company whose job is to protect the Internet came crashing to the ground. Or even got pounded competitively to the point that Microsoft takes a big chunk of the market, and then provides the same level of competence and security (notta) they put into their existing jewel, Windows OS. Methinks you provided an oversimplified, and flat out wrong analysis in your blog, Doug. Maybe some homework next time. :-)

If your analysis were correct, Flash, the most ubiquitous software on PCs, would not exist. The rest of your comments seem to be the same as an article in Barron's a few weeks ago.

The stock in Symantec dropped because investors did not believe in the merger's benefits, plain and simple.

Doug McIntyre

Not sure I understand the logic behind the Flash comment. Could you please explain?

Symantec stock dropped not only due to the merger, but also because Microsoft is entering the consumer market very soon. Symantec also lowered guidance twice in the last year and a half because they missed their quarterly window for delivering its consumer software in 2005, and becuase they have a 1 billion tax bill pending in front of the IRS because of accounting issues. All three of these issues/events hammered the stock last year. But the greater issue is one you seem to be ignoring -- dependence of security software on access to core OS technology. The greater the access to the OS, the more the security software can do. If Microsoft is competing with Symantec, and they are, the amount of information they give Symantec to get deep into the guts of the technology will be in question. Say, for example, down the line Windows OS makes critical underlying changes that break Symantec's Norton AntiVirus product. Can we trust Microsoft to provide important information to help Symantec fix the software and get it up and running when every day Symantec stays broken will benefit Microsoft's business? These are complicated issues, and deserve more than simplistic, sound-bite friendly commentary.

Barron's would differ with you on the reason the stock dropped, but that is between you and their author.

If your theory is correct, Macromedia's Flash and the Adobe PDF format could not have made the inroads that they have. There are 650 million Flash players now.

Doug McIntyre

Doug, the question here is not the level of success of Symantec. The question here is the behavior of a monopolist. Your analysis misses this point completely.