Not long ago, Betty Carty decided it was time to finally see what the Internet was all about. She started out by ordering an inexpensive Dell computer, assembled it herself, and was soon on her way to hooking up to the Internet.
After a few weeks of e-mailing and casual surfing, Betty thought she was really getting the hang of things. That is, until she received a message from Comcast, her Internet Service Provider, letting Betty know she would no longer be allowed to send out e-mail.
Betty was very dismayed. In the few weeks she was online, she had sent out more than 70,000 e-mails. She was tagged as a pattern spammer.
She wasn’t doing the e-mailing, though. It turns out, her computer was turned into a zombie. I’m not talking about the skeletal creatures with outstretched arms that rise from the grave at inopportune times in really bad movies. Her computer was taken over by a hacker.
-------------------advertisement---------------------
Two-Step Trading System Delivers 160% Gains in 3 Days!
While most investors struggle in today’s rocky market, a small group of novices have discovered a simple strategy that is delivering double and triple-digit gains on nearly a weekly basis. Click here to find out how you can test-drive this lucrative system...risk-free!
---------------------------------------------------------
Betty’s not the only one afflicted by a “zombie” computer. Today millions of computers are doing the dirty work for hackers. In fact, “zombie” computers are sending a staggering 4 billion e-mails each day, or more than 30% of all e-mails sent.
So today I’ll be taking a look at a couple of stocks set to battle it out over the PC security market.
McAfee (MCF:NYSE) has been a leading PC security business for years. Thanks to deals with Dell (DELL:NASDAQ) and Hewlett Packard (HP:NYSE), McAfee has grown at a 50% clip annually during the past five years, but the growth is not expected to last.
McAfee has grown so large, it’s now only expected to grow earnings at a 15% rate during the next five years. McAfee is sitting on a sizable stockpile of cash and short-term investments that, at last report, totals more than $830 million.
As a result, I believe McAfee is having trouble finding worthwhile investments to grow its business. Normally, growth stocks are starved for cash because of the continuing need for capital expenditure. Despite a high relative amount of current liabilities, in this case, the large cash and short-term investment holding is not a good sign.
Management can work through issues like that, though. It will just take time. McAfee is also facing an SEC probe into its stock-compensation practices, along with 79 other companies, and may have to restate earnings for the last six years. This could hurt McAfee’s stock even more so over the short-term, but it’s Microsoft (MSFT:NASDAQ), the bully of the PC industry, that concerns me most about McAfee.
You see, Microsoft has been developing its own line of PC security software, Windows Live OneCare. The beta test of the system was completed a few months ago. And now that OneCare is for sale to the public, Microsoft will be trying to dominate yet another segment of the PC market.
Microsoft has a good track record, too. First, Microsoft successfully tackled the demand for spreadsheet software. Next, in a highly publicized manner followed by a legal battle and much polarizing debate, Microsoft conquered the Web browser market.
Now, Microsoft has quietly set its sights on the PC security market. And with 70% of paid PC security software buyers up for renewal annually, Microsoft has a shot.
No doubt, PC Security is a lucrative business that is expected to almost double in size to $7.9 billion by 2009. The highly respected research firm, The Yankee Group, says the PC security industry could easily be worth $15 billion in the same time frame. And where there’s this kind of growth, you can bet the competition is going to get pretty fierce.
The big players are still Symantec (SYMC:NASDAQ), McAfee, and now Microsoft, but there’s also a lot of grass-roots freeware like antivirus software cleverly named AntiVir and free firewall Jetico Personal Firewall that are very popular as well.
Even though there are millions of people like Betty Carty out there, overall, increased competition will cost all of these companies their impressive profit margins. I would stay away from investing in them until the ensuing battle has been sorted.
On another note, if you want to avoid ending up like Betty Carty and the millions in her situation, run through this quick 10-step checklist to ensure your computer stays under your control and your valuable personal information is secure.
http://inhome.rediff.com/money/2004/dec/23tips.htm
Enjoy your weekend.
Andrew Mickey
Editor, Fear and Greed
Comments