Stop it...my stitches!

One of the unfortunate benefits of owning MSFT - besides the horrific stock performance, of course - is that nearly every day you're treated to a new negative article about the company. Worse still, there's often an unsettling amount of truth to them, albeit that many originate from angry competitors or the Government bodies they've whined to. However, once in a while you get one where you just have to laugh. For me, that was this piece from Alex Eckelberry, President of security vendor Sunbelt Software:

• Microsoft practices predatory pricing
  

Here's the essence of his argument:

It's bad enough that Microsoft is getting in to all aspects of security. But now they are going to kill their competition through predatory pricing.

For those who may not be familiar with the term, he provides this handy dandy definition which includes:

Predatory pricing is the practice of a dominant firm selling a product at a loss in order to drive some or all competitors out of the market, or create a barrier to entry into the market for potential new competitors.

He goes on to say that "But now we see that Microsoft is endangering the entire security ecosystem with ruthless, Standard Oil-style pricing."

Having successfully chummed the waters, the feeding frenzy begins and we get Joe Wilcox from the Microsoft Monitor Weblog chiming in with this:

Alex contends--and I would agree--"that Microsoft is endangering the entire security ecosystem."

Hmmm...predatory pricing, selling a product at a loss, endangering the entire security ecosystem no less? Those are some pretty serious charges. In fact, if true, they'd be grounds for an anti-trust complaint. So Alex must have some killer evidence to offer up, right? I mean, no one would be ignorant enough to make those accusations without compelling proof, right? Well here it is: MSFT is apparently pricing themselves 50% below the market leader. That's it. That's the sum total of the evidence offered. How, pray tell, does Alex know that this is below MSFT's cost? In a word, he doesn't. And if we look at Symantec and McAfee, the two publicly traded leaders in this space, we see that both currently enjoy gross margins even higher than that of MSFT (87.8% and 88.10% vs 85.9 respectively). Almost 90% gross margins for what effectively is a utility piece of software for most users?

Bottom line, sorry Alex, but I'm not buying into your argument. There's plenty of room for security vendors to drop their prices on the standard offerings and still make very attractive, albeit more normal, margins. And you've provided no evidence to support your implicit claim that MSFT is selling their products at a loss - in violation of the law. While I'm normally against MSFT competiting against its partners, in this case security vendors seem to have been only too happy to price people off a demand curve even as the problem of viruses, worms and other malware spiraled out of control, harming consumers and threatening MSFT's bottom line. MSFT needed to act and they did. As a result, consumers will likely benefit via lower prices generally. Isn't competition great?