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December 20, 2004

Trend sees US traction from Hotmail win over McAfee

Trend Micro Inc has pushed rival McAfee Inc out of one of its marquee accounts at Microsoft Corp's Hotmail, and is calling the win a cornerstone of a new push at the North American consumer market, where it has not focused heavily to date.

By CBR Staff Writer

Microsoft said that Trend will provide the virus blocking for Hotmail’s 187 million webmail accounts, replacing McAfee’s partnership of three years. Financial terms of the deal, like the deal it replaced, were not disclosed.

This lays the foundation for a renewed thrust into the consumer market in North America, said Punit Minocha, senior director of business development at Trend. We have a sizeable consumer presence in Japan, but in the North American market we have not focused as much.

In Trend’s last-reported quarter, the company said that its consumer revenue was 22% of the total, the remainder coming from sales to enterprises, where its gateway antivirus products are among the strongest available.

Minocha said that performance, scalability and virus signature response times were key reasons for the win. It would be naive to assume that price did not also play a factor, as most of Hotmail’s users do not pay a penny for the service.

McAfee’s shares took a tumble after the news broke, sliding almost 7%, despite the company’s insistence that the Hotmail deal did not represent a terribly large slice of its revenue and that other Microsoft partnerships are intact.

We continue to enjoy a very productive relationship with Microsoft, said Bill Kerrigan, a senior vice president at McAfee. Under a year-old deal, subscribers to the premium version of MSN 9 get McAfee software. That deal lasts as long as MSN 9 does.

The deal also gives insight into Microsoft’s closely watched but still poorly defined antivirus strategy, on two counts. First, it now seems unlikelier that McAfee is an acquisition target for Microsoft, if it ever was.

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Second, it suggests that whatever antivirus technology Microsoft is developing in-house, based on the technology it acquired with GeCad last year, it is not designed or not ready to do the kind of large-scale server or gateway virus blocking that Hotmail requires.

AV vendors have been waiting for 18 months to see what Microsoft will do with GeCad. The company’s only comments to date have suggested that the company is primarily looking at a desktop offering.

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