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The stocks of major antivirus software vendors were trading lower today after Microsoft announced the release of beta anti-spyware technology it bought in December and said it would begin giving away an improved tool to remove worms and viruses from its customers' computers.

Following Microsoft's news, shares of Symantec were down by more than 6 percent and shares in rival McAfee were down by around 4 percent in Thursday's late-afternoon trading. While the free antivirus and virus removal tools are not an immediate threat to the products from those companies, the releases could signal tougher times ahead for desktop security vendors, as Microsoft uses its size and influence to expand into markets now dominated by those companies, industry experts say.

Mike Nash, corporate vice president of Microsoft's Security Business & Technology Unit, says that spyware is a major concern for Microsoft customers, who are looking to the company for help. Spyware accounts for more than one-third of software program crashes on Windows XP that are reported to the company, he says in a document posted on Microsoft's Web page.

Microsoft also says that it is releasing a free malicious-software removal tool that consolidates earlier software tools for eradicating the Blaster, MyDoom, and Sasser worms, and that will be updated each month to detect and remove other threats as they appear.

Windows customers will be able to receive the malicious-code removal tool through Windows Update and the Windows Automatic Update features, which connect to more than 112 million Windows XP PCs configured to receive updates automatically, Microsoft says.

Antivirus Companies Respond

A Symantec executive downplays the significance of the news.

"It's a natural progression from them, from free removal tools to a consolidated tool," says Vincent Weafer, senior director of Symantec's security response group. "There's nothing dramatically new here. Protection is still the name of the game."

While Microsoft may be able to clean up systems that have already been infected after major outbreaks of high-profile worms and viruses, the tool will not keep the systems on which it runs from getting infected in the first place, and it won't have the breadth of information on viruses, worms, Trojan horse programs, and other malicious code that Symantec does, he says.

Nash acknowledges as much.

"There's no way you could substitute this for an [antivirus] product. They have encyclopedias of tens of thousands of worms and viruses and offer detection and removal, but also platform protection," Nash says.

Microsoft is merely responding to the demands of its customers and product support teams in releasing the detection and removal tool, Nash says. The company is not trying to replace antivirus software but instead provide a tool for the two-thirds of computer users who don't use it, he says.

Honors Tradition

The release of the anti-spyware software and virus removal tool is consistent with Microsoft's tradition of using utilities to address pressing issues affecting its customers, but doesn't pose an immediate threat to antivirus shops, says Pete Lindstrom of Spire Security. "It used to be file compression, and management of RAM. Now it's security," he says.

But Microsoft's announcements do hurt the growth potential of consumer security software companies, even if they don't dim their short-term prospects, says Mateo Millet, an analyst at Avian Research.

"The desktop market is being defined by other types of products that are added to the [antivirus] bundle. One thing that [Symantec and McAfee] thought would be a real driver was anti-spyware. Adding it in to their product suites doesn't make them any more expensive, but it does draw people to those products. If [customers] can get it for free, it decreases the growth possibilities of those...security products," he says.

No Decision on Anti-Spyware Fees

Microsoft has been focused on getting the beta anti-spyware release out and hasn't decided yet whether it will sell its Windows AntiSpyware product or give it away, Nash says.

"It's a hard question--how it will be delivered, whether any of it will be free or some of it will be free," he says.

The company also hasn't decided how closely the anti-spyware software will be integrated with Windows--for example, whether users could control the Windows AntiSpyware software from the new Windows Security Center in XP Service Pack 2--or whether the antivirus and anti-spyware products could be bundled and released together in the future.

Nash also declines to comment on a possible release date for the long-promised Microsoft Antivirus product, rumored to be planned for mid-year.

"Microsoft has not announced a schedule," he says.

Whatever the case, antivirus companies should now be on notice that Microsoft is coming, even if they somehow missed the software giant's earlier rumblings about entering the security market, says Laura Koetzle, an analyst at Forrester Research.