Calls of Note Part 4

- Piper Jaffray is out with an interesting note saying they believe online backup will be the next major trend in consumer PC security. They believe the focus on the McAfee (NYSE:MFE) and Symantec (NASDAQ:SYMC) stories will shift to online backup in 2007. Data backup is a growing concern for consumers. Only ~4% of PC users currently use backup on regularly basis.

Sensitivity to model: SYMC - Online backup could increase Symantec's 2007 revenue by 5%, and increase EPS 7%. In FY08, the impact could be +12% on revenue and +14% on EPS.

Firm believes data backup is a growing concern for consumers. In August, Apple Computer estimated that only 25% of consumers have backed up their computers at least one time, and 4% of consumers back up on a scheduled basis. Bottom line is backup has become increasingly
important over the last five years as consumers have been stockpiling photos and digital music onto their home computers. To put this trend in perspective, digital camera sales have grown 28% over the past five years (source: PMA & IDC), and portable music players have grown 110% over the same period (source: NPD).

Believes AOL will be first to market. Today AOL offers backup to CD/DVD or external drive. Expect an online offering from its partnership with FarStone Technology late in 2006. Symantec will be second to market. Symantec plans to release Norton 360 security suite sometime between late in 2006 and the end of March '07. Given the firm has not seen the Norton 360 beta, which was to be released by the end of the summer, they expect Norton 360 will be available in March of '07. Believes McAfee will be third to market. Today, McAfee offers backup to CD/DVD or external drive.

Anticipated Pricing. While the above companies have not announced the amount of storage and pricing, the average pricing for 10GB from current players (AT&T, Carbonite.com, and GoDaddy.com) is an outrageous $179 per year. Firm believes 10GB is minimal amount of storage to generate meaningful consumer interest. When the security companies go live with online backup, they expect the pricing will be similar to Carbonite.com pricing, perhaps $50-$100 per year.

Notablecalls: Interesting note. One for the investor types.