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Microsoft’s sudden acquisition of highly rated anti-spyware startup Giant Company Software has set the cat among the pigeons.

As competitors rush to spin the news as a “validation” of the nascent anti-spyware sector, analysts predict that Redmond is working on an enterprise-class product combining spyware- and virus-fighting capabilities.

“We believe Microsoft will come out with an anti-virus product with embedded spyware protection and they’ll start a price war in the enterprise space,” said Gartner security analyst John Pescatore.

Read more here about Microsoft’s acquisition of Giant Company Software.

In an interview with, Pescatore speculated that Microsoft will launch a combined offering that marries Giant’s anti-spyware application to the anti-virus tools acquired in 2003 from Romania’s GeCAD Software Srl.

At the time of the GeCAD acquisition, Microsoft made splashy headlines with plans to offer a standalone anti-virus tool for Windows users, but more than a year later, the company is still pointing customers to third-party offerings.

Amy Carroll, director of product management in Microsoft’s Security Business Technology Unit, declined to discuss long-term strategies. She said the immediate plans call for a beta of a standalone anti-spyware application for Windows 2000 and later versions.

During the beta, the application will be free, but there are hints that Microsoft will charge a fee for a final version. “We do not have a final plan for the final version. We’ll use the beta process to figure out the right business model,” Carroll said.

“It will be a client-side offering for individual machines. We will be encouraging all our customers to use that, whether inside a business or in a consumer setting,” Carroll told

Microsoft will continue to support Giant anti-spyware customers through the term of their existing contracts. Two other Giant products—Spam Inspector and Popup Inspector—will be discontinued.

Next Page: Microsoft says there’s “no timeline” on an anti-virus product.

Asked directly if the Giant and GeCAD technologies would be merged into a single application, Carroll said it was “way too early” to discuss those moves. She said GeCAD’s technology and expertise had already been successfully used to create virus detection and removal tools to deal with cleanup from the Blaster, MyDoom and Download.Ject worm attacks.

“We haven’t moved away from our position to deliver an anti-virus product similar to what’s out there today. But there’s no timeline today on when that will happen,” Carroll said.

An anti-virus product would put Microsoft in direct competition with the likes of Symantec, Trend Micro and McAfee, companies that have partnered with the software giant on an information-sharing Virus Information Alliance.

Roger Thompson, director of content research security management at Computer Associates, described the Giant acquisition as “confirmation that the spyware industry cannot be ignored.”

“This confirms what we’ve been saying all along. You can’t expect anti-virus products to adequately handle spyware. You simply can’t make it work. It has to be done with a dedicated anti-spyware product, and clearly Microsoft recognizes this,” Thompson said.

Computer Associates, like other security vendors, charges extra for anti-spyware protection, but if Microsoft comes out with a combined offering and uses its marketing strength to compete, the competitive landscape could change dramatically.

But CA’s Thompson isn’t about to concede. “We’ve always competed against free products. This is a new market, and it’s a big market that’s growing very fast. From a competitive standpoint, this does not worry us at all,” he said.

Webroot Software Inc., an anti-spyware vendor with a major foothold in the enterprise market, believes it’s a “tough sell” for Microsoft in the security business.

“I see this deal as an acknowledgement from Microsoft that they can’t deal with securing their own products,” said Webroot chief executive David Moll. “This is a big change from Microsoft’s original position on tackling spyware. [XP Service Pack 2] was introduced to deal with the spyware problem, but it’s gotten worse.”

“In the near term, this could be a nonevent like the GeCAD acquisition. In the long run, the question will be whether customers will purchase a security product to protect software that is sold by the same company,” Moll said.

“It’s interesting to see if consumers will reward them for selling the solution to their own problem. For enterprises, I see this as a nonstarter. The last thing an IT administrator wants to do is trust their security to Microsoft,” he added.

Moll also questioned Microsoft’s overall approach to dealing with spyware, pointing out that the company just inked a three-year deal to use Webroot’s technology for its MSN subscribers. “It’s not clear there’s a well-thought-out strategy here.”

Eric Howes, an independent researcher who tracks the spyware scourge, said he thinks Microsoft will make a significant difference in the sector. “I doubt they will completely solve the problem because it’s very complicated and difficult to deal with spyware. But I think Microsoft’s involvement will go a long way toward making a difference.”

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