Microsoft

Microsoft shocked the security industry on Tuesday by announcing that it will stop selling its consumer-focused Microsoft OneCare security software. Instead, Microsoft said that it will offer a new free alternative dubbed "Morro" in mid-2009. What does this sudden change in direction mean?

1. Microsoft is cutting its losses
After two years of hawking OneCare, the company barely made a blip in consumer security market share and was probably bleeding red ink. It is cheaper to give away Morro than to package, distribute, and promote OneCare.

Windows Live OneCare logo

(Credit: Microsoft)

2. There's a reason to remain in the market
So why not kill endpoint security altogether? Good question. As long as Microsoft continues to offer Forefront (i.e., its commercial endpoint security product), Morro is a relatively easy thing to support. Alternatively, I can't see Microsoft walking away from any PC software. The PR implications of doing so are too dire.

3. Morro won't kill other alternatives
Free is pretty compelling, but it is nothing new. Users could opt for a strong free alternative today called Clam AV, but Symantec, McAfee, Trend Micro, and Kaspersky still do pretty well with consumers. Users either don't know about Clam or believe that "free" software must have a catch. On another note, about 40 percent to 50 percent of consumers still buy security software at their local Best Buy, Frye Electronics, or Staples. With no revenue stream, I can't see Microsoft boxing up Morro and paying for shelf space, so Morro won't even be available to a large percentage of the potential market.

4. Microsoft won't bundle Morro in consumer Windows
Ten years ago, I have no doubt that Microsoft would have made security part of the operating system. Heck, Microsoft gave away its antispyware software as recently as 2006. Pursuing this course of action doesn't make sense in this case, however. Aside from the obvious antitrust issues, there is another strategic reality here. Netscape and Internet computing threatened the Microsoft franchise. Symantec Endpoint Protection does not.

Whether industry pundits admit it or not, Microsoft has made great strides in security over the past five years, both in terms of products, processes, and industry leadership. These advances are extremely visible in the enterprise market, but even Microsoft couldn't extend this momentum into the brutal and fickle consumer space. There are too many other fast-growing, highly profitable market segments for Microsoft to pursue, so it simply makes no sense to keep fighting in a crowded market with dwindling margins.

Microsoft consumer security may become free, but expect to hear a lot less about Morro once Microsoft pulls OneCare from retailers' shelves.

Microsoft's decision to discontinue OneCare in favor of a new free antivirus product also means an end to Equipt, a $69-per-year subscription version of Office and OneCare that the company had been selling on the shelves of Circuit City.

A box shot of the Equipt product, which only briefly has graced Circuit City's shelves.

(Credit: Microsoft/Circuit City)

The copies will be headed out of retail stores in the coming weeks, although the subscription will run through some time next year. But since Microsoft plans to offer free licenses of Office to Equipt customers when their subscriptions end, those existing copies look like a pretty good deal for those who need Office Home and Student--the version of Office included in Equipt.

The company had announced Equipt as something tailored for so-called "tech benches"--services like Best Buy's Geek Squad. However, in the U.S., Circuit City was the only retailer that had started selling Equipt.

Microsoft had hoped to capitalize on the fact that people were already buying subscription security software to upsell them on Equipt. But with Microsoft now planning on giving away security software, that opportunity appears to have gone away.

"It was a very difficult decision for us to shut down Equipt but the fact of the matter is there is this higher order need (to offer free antivirus software)," said group product manager Bryson Gordon. Gordon declined to say how many Equipt subscribers there are, but said the product had met internal sales goals.

"The decision to end-of-life Equipt was not in any way based with sales performance," he said.

Equipt, initially known by the code name Albany, is unlikely to be the last Office subscription service, particularly as Microsoft moves into Web-based versions of its productivity software. The company has also sold prepaid Office subscription cards in some countries.

"What we really are going to turn our attention to is other places where we can build a software plus service offering of Office like we sold on a subscription basis," Gordon said.

As for existing Equipt subscribers, they not only will get a free license to Office Home and Student, they can also call and cancel their subscription, get a pro-rated refund and still get the copy of Office. Gordon said that Equipt buyers tended to be Microsoft's early adopters and said that "We really want to make sure they are taken care of."