McAfee is a computer security and anti virus software company. Started in 1989, by john McAfee, by the name of McAfee associates, this small company was so successful that today it’s one of the leading providers of network securities and available solutions. With its Headquarters in Santa Clara, California, McAfee Inc. protects systems from known and unknown threats around the world and offers its unmatched expertise to all segments varying from home users to corporations, who express confidence in its ability to prevent disruptions and block attacks. McAfee strives to reach its organizational goal which is to “become a worldwide leader in intrusion, prevention and risk management solutions and services”.
McAfee Associates was founded in 1989, by John McAfee in his attempt to market his antivirus software when the security software market was at its peak and still predicted to grow at the rate of 16.9% annually in the coming years.
From its initial years the software security industry has come a long way and is on the road to achieve tremendous growth in future. The era of 1960s and 1970s is identified as the era of mainframe computers. The most common security threats of this period were certain programs that had the ability to clone themselves. These programs were then known as “rabbits”. Although ‘rabbits” were not much of a threat to the computers, as they did not replicate from one system to the other and were regarded as a local phenomenon, a more deadly epidemic of those times attacked the Univax 1108, it had the ability to merge itself with executable files and do as much damage to one’s data as modern viruses of today.
During the 1980s, in the early part of the decade the trend of privately writing programs and distributing over general stores emerged as computers became more ubiquitous, and this gave rise to the prevalence of viruses simultaneously. The latter part of this decade marked a global scenario of highly debilitating and extremely notorious viruses, such as Vienna, VirDem and Jerusalem. It was at this point in time that antivirus software companies saw an opportunity and started the process of developing antivirus soft wares in order to prevent the disruptions created by the fatal viruses.
With time intrusion software became more destructive and complex compelling the software protection industry to follow suit. The approach of 2000(Y2K) further increased the expenditure in technology of a global front, and the antivirus industry felt the spillover effects. This trend of investing in technology further aggravated the completion among the software companies. As companies, indulged in cut throat competition while vying for customers, investigations by the Security and Exchange Commission (SEC) led to a series of litigations. As a result of this intense competition McAfee blamed Dr. Solomon for a particular software feature, after which Dr. Solomon counter attacked McAfee, alleging it for false advertising. McAfee and Symantec also faced each other in court to settle issues regarding copy right infringement.
A decrease in IT expenditure in the 21st century led to an industry shakeout, where only the strongest survived. This economic slowdown was not expected to last for long and the future promised strong growth predictions o 16.9% between 2004 and 2008.
It was in the very late 1980s or early 1990s that McAfee associates grabbed an upcoming opportunity in the software protection industry. In its initial years John McAfee, the founder of McAfee Associates, advertised on a small scale, on bulletin boards which required customers to pay only if the software was up to their satisfaction. In a span of three years, the antivirus software gained such popularity among its customers that McAfee Associates decided to take the company public.
Keeping the dynamic and competitive nature in mind, along with the growth opportunity McAfee after its decision to incorporate, decided to further diversify in other types of software which were compatible with the electronic channels. In its attempt to become a market leader in security software industry, McAfee adopted certain business strategies.
McAfee in its early years adopted the product bundling strategy, in which it attempted to expand its product portfolio for its customers, for which it indulged in mergers and acquisitions. This proved to be very fruit full for McAfee and by 1997; annual sales peaked at $600 million.
Keeping in line with its growth and acquisition strategy and its corporate mission of securing “consumers and businesses from the desktop to the core of networks by offering best of breed products and services that protect global consumer’s information technology systems and infrastructure”, McAfee merged with Network General Corporation to form Network Associates and pursued its objective by acquiring various companies namely Secure Networks, Trusted Information Systems and Cyber Media.
This trip to success had to face the road blocks when in 1999 Network associates was forced to restate its previous year’s financial statements. After catering the lawsuits, Network Associates suffered major losses. If this was not a big enough jolt to the company, its top executives including the then Chief Executive Officer (CEO) William Larson resigned from his post. The financial repercussions of an aggressive growth acquisition strategy continued to haunt Network Associates, and after a second detailed investigation by the Security and Exchange Commission (SEC) in 2003 regarding its acquisitions revealed flaws in accounting, Network Associates was again forced to re state the financial results for the fiscal years 1998-2000.
This hitch however did not stop Network associates from pursuing its acquisition growth strategy; however the direction of the business was streamlined exclusively towards security. In an effort to reflect its commitment towards the security products, Network Associates at this point changed its name to McAfee Inc.
The key executives at McAfee Inc. till the year 2005 include Stephen Richards, the Chief Financial Officer., who left the company in January 2005 and was replaced by Eric Brown. In addition the former president of Sniffer Technologies, Raymond Smets also served as a member of the top management at McAfee when t acquired Sniffer technology in October 2002 till July 2004 when it was sold to the Network General Division. It is also worth wile to mention at this point that at McAfee, in addition to the salaries paid out to the top executives, in the year 2004 they were also granted a total 775,000 shares worth of stock options. In total the executive officers owned approximately 209,847 shares which is 1.8% of the outstanding shares.
Among the board of directors as of 2005, there was only one internal member present by the name of George Samenuk, who was also the Chief Executive Officer (CEO) and the chairman of McAfee Inc. the three board committees include the audit, nominations and compensation committees. The other board members also termed as “independent directors’ were selected for a span of three years and receives an annual compensation of $40,000 annually plus $1500 for each meeting attended for their services and expertise. The lead director however, Mr. George Samenuk in addition to all this received an additional $10,000 annually.
To improve its financial performance in the industry as well as maintain its profitability, McAfee in the year 2004-2005 altered its capitalization strategy. Apart from writing off its financial debt worth $347 million, McAfee also repurchased common stock worth $220 million. To tackle the problem caused by decreasing revenue and increasing net income, McAfee undertook certain cost cutting measures in order to achieve a 25% operating margin.
McAfee also plays its role in providing convenient services to network providers, who instead of developing their own security software outsource it to companies like McAfee, thus enabling McAfee to sell multiple products to numerous clients.
The products offered by McAfee can be categorized in two broad categories, namely, McAfee System Protection Solution and McAfee Network Protection Solutions. The McAfee System Protection Solution is aimed at desktop users and servers, while the McAfee Network Protection Solution is designed for corporate networks.
The product availability of McAfee can be geographically categorized into five locations namely Europe, North America, Africa, the Middle East and Latin America. McAfee offers anti spyware, antivirus, anti hacker, antispam, anti abuse and wireless products in its range of desktop and server solutions. Consumers are requires to purchase a license for using this products and also continuously update these security soft wares to keep themselves updated regarding new viruses.
McAfee antivirus, anti Spyware and Anti Hacker: McAfee antivirus Scan detects removes and blocks potential viruses which may cause the computer to slow down or damage data permanently. McAfee anti hacker software includes the McAfee fire wall protection software prevents unnecessary internet connections to and from one’s PC in order to safe guard one’s documents. The McAfee antispyware software detects the PUP’s, the Potentially Unwanted Programs such as Adware, tracking cookie, spyware and other programs before they attempt to slow the processing of the PC or compromise the entire data stored in the computer.
Anti Spam and Anti Abuse: the McAfee spam killer blocks access to certain known theft sites thereby protects personal and corporate information against “phishing” scams over the internet. The McAfee privacy settings further protects any transfer of personal information over the internet, it also enables parents to keep a check on their children’s net surfing habits by activating certain parental control and also helps block unwanted advertisements, emails and inappropriate websites.
Wireless and Mobile: Lastly, McAfee mobile virus scan, as the name suggests protects mobile phones from viruses that might have been transmitted via the internet while accessing the email or through downloads.
The McAfee products are sold on the following pattern. Each user is required to subscribe for a one year’s license for the home security internet suit for $69.99 which includes a mail in rebate of $20. A one year license for three users is available for $129.99. Differential pricing is used for small businesses, keeping in mind their length of subscription and the size of the organization.
Coming down to the corporate solutions, Network solutions offers two core technologies to its customers. One is IntruShield and the other is Foundstone. Foundstone which was acquired in incorporated in McAfee solutions in the year 2004 is used to detect the most important assets of a corporation and further detect its vulnerabilities. IntruShield is a proactive prevention system which attempts to counter attacks before they cause any damage. Also known as the intrusion prevention system.IPS, IntruShield combines both hardware and software technology to deliver a comprehensive proactive solution, using Denial of service (DoS) analysis techniques preventing up to multi gigabit speeds.
McAfee also has certain projects in the pipeline, as it hopes to expand its wireless solutions. By collaborating with VeriFone Holdings Inc. McAfee was the first one to provide virus protection at point of sale terminal (POS) in United States.
Among its competitors Symantec proves to be its strongest competitor, is most noted for the Norton series for personal computers, and has used this popularity to launch other products and expand into the corporate security market. Symantec has achieved strong financial performance for the past three years despite legal infringements, with a continuous increase in the net profit margin and a net income of $371 in the FY 2004.
Other competitors in the security market include Sophos, Dr Ahn, Fescure, Trend Micro and Panda. Microsoft is one of the new entrants in the market and poses a major threat to all the market players with its sheer size and eliminating power. With nearly $4.9 billion available in cash equivalents, Microsoft is capable eliminating the small as well as the big market players such as McAfee or Symantec.
In order to achieve its organizational goal of becoming a “worldwide leader in intrusion prevention and risk management solutions and services, McAfee must continue to focus on innovation and quality services. In this dynamic and cut throat completion innovation and differentiation is likely to be the key to success in the future.
The antivirus industry is flooded with local and global competitors, all offering software solutions to its customers. One of the biggest issue facing McAfee today is regarding the competitive advantage it has over other solution providers which would help McAfee maintain its position as a market leader. Therefore, now is the time McAfee highlights a unique selling proposition (UPS), for it to persuade customers to pay for its services despite the availability of free anti spyware soft wares being offered by its new competitor, Microsoft.
Competition, although an incentive for McAfee to continuously differentiate itself with the help of new technologies and solutions it is also a great threat facing McAfee. Competitors in the security software market include Symantec, Trend Micro, Computer Associates, Panda, Fescure and Dr. Ahn’s.
Symantec is McAfee’s strongest competitor and the industry leader in security solution providers. While Symantec was most noted for its Norton series which provides security solutions for personal computers, it capitalized on its popularity and expanded its operations in the corporate market as well. The threat Symantec posses to McAfee is that it provides solutions for the entire enterprise network from worms, viruses and Trojan horses. In 1997 Symantec “filed copy right infringement charges against Network Associates (now part of McAfee)”. As a come back, the following year, in 1998, a lawsuit was filed against Symantec itself by antivirus product users alleging that “Symantec ignored its warranty by charging to fix a year2000 software glitch”.
Computer Associates is another competitor and is one of the world’s largest software providers. It is greatly expanding in the system management and security segment thus serving to be a future threat in future.
Panda software, due to its aggressive international expansion is sold in 200 countries around the world and achieved an unprecedented 55% increase in revenue in the year 2003-2004, almost three times the industry average. One of the reasons for this phenomenal performance is its dedication to customer service which serves as a differentiating factor for Panda software in this competitive environment. Thus, a cause of worry for McAfee.
Other competitors such as Trend Micro, dominates the industry in innovation, which makes break through its highlighting feature. Although it has not expanded into a very wide product portfolio, it does offer an intensive product line depth. Sophos on the other hand competes with the major players by providing highly scalable products and has expanded operations in 150 countries.
Microsoft is a new entrant in the industry which poses a serious threat to all its competitors in the industry, which can with its sheer size, has the potential all big companies including McAfee.
Most of the above mentioned competitors are trying to make a mark in the software protection industry by highlighting one or more of its features which sets them apart, for example customer service or customized solution. Therefore McAfee at this point should also realize that unless it offers something different to the customers better than its competitors, it will be very difficult for it to survive in this dynamic industry in the long term, especially with the entrance of Microsoft in the business.
According to the financial results from the year 2004 McAfee as of January 2005 was “the largest security software company in the industry” and had underwent certain strategic transactions such as investing in high growth security sector and paying of a debt worth $347billion which made McAfee debt free as entered the year 2005. Despite these initiatives undertaken by McAfee to improve performance in financial statements, the issue facing McAfee was its decreasing rate of revenue since the past two years; although an increase in the net income had been witnessed. Therefore McAfee started the process if cost cutting measure to rectify this misbalance.
In order for McAfee to differentiate it from its competitors, round the clock and efficient customer services can very helpful to provide an edge over its competitors. It is also important to mention here that although Panda software has high regards for customer services, yet there is need for improvement, which opens an opportunity for McAfee to fill the gap.
The very nature of software protection industry puts it under immense pressure to continuously innovate in order to fight new viruses and worms better than the other and also before its competitors. To sustain this platform McAfee has indulged in certain mergers and acquisitions for example its merger with Network General Corporations to pursue its vision of becoming a leading network security and desktop management specialists and its acquisition of Trusted Information Systems, Cyber media and Secure Network. This growth acquisition strategy adopted by McAfee, although risky enabled McAfee to expand its product offerings and in turn achieve higher sales.
McAfee operates in the form of an electronic medium. Hence, cost of expansion is less as there is no need of physical expansion and everything is done electronically. Also, McAfee has pursued an expansion strategy over the past which has been beneficial in some areas of business. This has only been possible with the electronic medium as fewer resources are required. Also, the expansion strategy allows the convergence of multiple services available to users which can be converted into competitive advantage.
In today’s global world, most of the work is now done across borders which can take the form of out sourcing or importing new ways of doing business. Hence, the use of information technology is increasing along with the use of computers. With such dependence on electronic means of doing business, the threats are also increasing.
In order to remain ahead of competition continuously invests in remaining up to date and be aware of the new threats and provide adequate protection against them. The software protection industry is very dynamic with new changes everyday and new kinds of viruses and threats being detected. In order to sustain customers, huge investment in adapting to being aware of the changes taking place is very necessary.
If it lacks in such investment, it will be left behind while the market will be taken over by competitors.
McAfee has been in business as a security provider against viruses and worms for computers since 1989. With time, has proved itself and has been able to build a brand name for itself and positioned itself in the mind of the consumer as a trusted computer software security provider. This brand name can help to cash in from a lot of new products. can use its brand name to increase its product line width or even length. Much use is not being taken right now, but diversifying its portfolio with the help of its brand name can also be used as an expansion strategy.
Competition in this industry is very tough. As the number of customers increase, so does the amount of competition. Currently there are a lot of competitors for McAfee in the security industry and more and more are diversifying there product range to make a mark in this sector.
McAfee’s biggest rival is Symantec that offers a lot products cashing in on the advantage of its brand mane Norton. Also, Symantec has a distinct advantage of providing enterprise solution which is seen as a all in one package. Another area where Symantec poses a threat to McAfee is its ability to offer data transfer services in addition to virus protection. Symantec is able to do that by pursuing an acquisition strategy as well and merging with VERITAS. This merger adds a service option to the package Symantec was previously offering to its customers and hence, gives Symantec an edge over McAfee.
Computer Associates is an upcoming security provider. Its main operation is providing software solutions but since the barriers to entry are low, it is making its mark in network security.
Panda software is another rival which plans o take over the industry by differentiating itself on the basis of customer service. As McAfee lacks hat or needs more improvement in this aspect, it is a threat to McAfee. Panda is also making international expansion and has already maintained existence in more than 200 countries. This aggressive expansion strategy is also a wake up call for McAfee.
McAfee has other competitors which are small like trend micro but they pose a threat to McAfee as the focus on particular segments of the markets and are very innovating as far as those sectors are concerned. Hence, McAfee must retain an upper hand in those specific sectors so that it is not left behind.
The biggest threat is the expectation of Microsoft in this business which is expected to snatch a major share of the market. Microsoft is a major player as far as software is concerned and has a brand loyal customer base. Also, with he amount of resources and cash Microsoft has, threat of takeover I also prevalent.
