Russian Kaspersky Lab offers antivirus protection in U.S.

ByJon Swartz, USA TODAY
November 25, 2008, 9:48 AM

SAN FRANCISCO -- In his quest for a bigger share of the highly competitive computer-security market, Eugene Kaspersky treks to 20 to 30 countries a year, promoting the company bearing his name and warning the world about cybercrime.

Cybercrime "is everywhere, and the crooks are getting more organized," says Kaspersky, co-founder and CEO of Moscow-based Kaspersky Lab. "It isn't just in Russia."

The 11-year-old computer-security company, which made its name in its native Russia and Germany, is now setting its sights on the U.S. and elsewhere after establishing a beachhead of retailers in North America the past few years.

In August, his Kaspersky Lab introduced a slew of consumer products in North America, based on its well-regarded security software. It followed that up with an advertising blitz online and in print in the U.S. this fall as it takes on industry giants Symantec and McAfee. The up-and-coming computer-security company is slowly gaining share — based on market and unit sales in the U.S. and worldwide.

Kaspersky is the only major vendor to improve retail sales of antivirus and computer-security suite software in the U.S. this year. Its sales soared 137%, to $15.5 million, through August, according to The NPD Group.

The company has succeeded in large part because in 2004 it was the first to identify a major shift by hackers to cybercrime, security experts say, and it tapped into a growing audience of consumers who were willing to pay extra for a security-software program to protect their PCs.

When Kaspersky made its pitch to retailers in the spring of 2006, many were skeptical about "another Internet security product on their shelves," says Steve Orenberg, president of Kaspersky Lab. "But Eugene said two things: The threat was changing, and the sophistication of the technology was changing."

In 2006, 200 retail stores in the U.S. and Canada carried Kaspersky products. Today, about 15,000 do.

Kaspersky has recruited retailers and distributors, such as Best Buy, Fry's Electronics and Staples, by giving them more attractive profit margins and marketing and technical support. "It's the tender, loving care model," says Jon Oltsik, senior analyst at Enterprise Strategy Group (ESG).

Kaspersky is making strides against the backdrop of a slackening market. Sales of computer-security software for consumers are expected to grow just 20%, to $3.5 billion, by 2012, according to Gartner. Kaspersky finds itself competing directly with the big boys for fewer prospects. This is reflected in a survey of 206 businesses — 40% of whom said they would consider switching desktop security vendors within 12 months, ESG says.

An early start

Like other talented, young Russian programmers, Kaspersky got started early. He studied cryptography at a high school co-sponsored by the Russian department of defense and the KGB, and later worked for the defense department as a cryptologist. (Kaspersky says he had no involvement in the KGB.)

At the KAMI Information Technologies Center, he and colleagues developed the AVP antivirus project. He founded Kaspersky Lab with his ex-wife, company Chairman Natalya Kaspersky, and two others in 1997. The company's revenue has soared from $24 million in 2004, shortly before it entered the U.S. market, to a projected $370 million worldwide this year. But despite Kaspersky's push in the U.S. and modest market share gains, its rivals are far from quivering.

"When you stack them up against a Symantec, McAfee or Trend (Micro), they just aren't there as a major competitor," says Dave Cole, senior director of products at Symantec, which unfurled a new version of its Norton Internet security software in September. "You have to do some creative math to put Kaspersky at No. 4."

Adds Carol Carpenter, vice president of global consumer marketing at Trend Micro, the No. 3 computer-security software vendor: "I admire (Kaspersky's) scrappiness. But their challenge is turning market share gains into profitability. Acquiring market share is expensive."

Kaspersky has a strong presence in its native Russia, Germany and China, and it is attempting to grow in the USA, as well as Japan and Australia.

It garnered just 4.6% of unit share in the U.S. in July, NPD Group says. (Though that is up from 1.1% in July 2007.)

Wooing developers in style

Kaspersky has gained share, in large part, through the Kaspersky Developer Conference, a multiday bacchanal of sightseeing, gourmet food and world-class entertainment that brings hundreds of employees and business partners together and sets the agenda for Kaspersky's financial goals. This summer, developers partied in St. Petersburg, Russia.

The pièce de resistance was a waltz performed before an orchestra by Kaspersky employees at Smolensky Cathedral, which was built in honor of the resurrection of Christ. It also premiered a silent film, in which Kaspersky played a Chaplin-esque character battling behemoths Symantec and McAfee.

Such histrionics leave an impression. When Stefan Zauchenberger, managing partner of ICE Systems, a Kaspersky reseller in Kansas City, Kan., met Kaspersky (at a developers conference in Malta in 2004), he was shocked. "Here's this hairy man coming toward me, and he gives me a bear hug," Zauchenberger says. "He said, 'Good to have partner in United States.' "

"He is very personable, approachable and funny," Zauchenberger says. "It is endearing. I consider him a good friend."

The changing threat

A hands-on approach is essential because battling the cyberthreat is a tricky business: There is always a new threat. "There is another sea change today, toward cyberattacks of applications on Facebook, MySpace and AOL AIM," says Randy Drawas, chief marketing officer at Kaspersky. "The threat has changed. Our mission is to reinvent ourselves."

Kaspersky Internet Security 2009 ($79.95) and Kaspersky Anti-Virus 2009 ($59.95) boast faster, more sophisticated tools to block malware from ever running on a PC, without putting a strain on the machine or software applications, Kaspersky says. It can also thoroughly scan all software on the machine for any known vulnerabilities and includes tools designed to keep users' data safe and secure. An early-warning system leverages the experience of each user to benefit all users, as soon as new malware is discovered.

Such software is considered essential to tamp down a soaring number of malicious threats and cybercriminal activities. There are more than 11 million malware threats, up nine times from 2007, computer security company Sophos says.

Often, consumers are "careless" by not updating their PCs with security software and visiting dangerous sites, Kaspersky says.

"Consumers themselves" are the greatest cyberthreat to the general public, he says. "We want them to know that we pay more attention to the quality of products, and not to marketing."

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