McAfee expands in China for expected security boom

McAfee hopes 3G will boost the security market in China

McAfee is expanding its staff in China amid a boom in the country's security market fueled by the launch of next-generation mobile networks.

As it has done elsewhere, 3G in China will draw more people to use online services through netbooks and mobile phones, creating demand for security products, Steve Redman, McAfee's Asia Pacific president, said in an interview.

"We think security in China is about to explode," Redman said.

McAfee will price its products aggressively to grab more of China's security market, which does not yet have a dominant player, said Redman.

Chinese consumers still represent a largely untapped market. Over 10 million Internet users in China use PCs with no antivirus software, according to an estimate by the country's domain registry center.

McAfee has partnered with network operators China Unicom and China Telecom to distribute its software, Redman said. The operators offer McAfee's antivirus software to most of their fixed-line Internet subscribers, and will do the same for 3G mobile users, he said.

China Mobile, the biggest carrier in China and the world by subscribers, also has a pilot program with McAfee that could lead to a distribution deal, said George Man, McAfee's managing director for Greater China.

All three of China's carriers have launched 3G networks and are working to expand their coverage to new cities this year. China has over 680 million mobile phone users, according to the country's industry and IT ministry.

While 3G will boost the security market in China, McAfee may be overestimating its effect, said Matthew Cheung, a Gartner analyst. Use of 3G data services will take time to spread beyond their current, limited base of business users, he said.

"That's a very large opportunity, but I don't think we see it at this moment," Cheung said.

Still, McAfee has made significant inroads in China, ranking fifth in the country's market for security software, Cheung said. Chinese security vendors take about 40 percent of that market, he said.

China's security software market will likely slow from its recent high double-digit growth to annual rates of 10 percent to 15 percent in coming years, Cheung said.

McAfee's revenue from China has already grown by 40 percent for two consecutive years, the company says. The security vendor has also expanded its China staff by nearly one-third in the last year, though its India office remains the company's largest in Asia.

About half of McAfee's China staff is currently dedicated to research and development. Future hiring will reduce that proportion, but it will still remain higher than in other countries, partly because local staff are needed to counter the high volume of security threats that appear in China, Redman said.

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