Security software giant Symantec acknowledged Monday it faces some important gaps in its product portfolio in the areas of encryption and identity and access management that it plans to fill, even as it prepares to counter Microsoft’s impending entry into the antivirus and anti-spam market.

Symantec currently does not have any products in the fast-growing segment of identity and access management, though it has a few partnerships with third-party providers in the encryption segment, said Symantec CEO John Thompson. The company is looking closely at expanding its reach into both these areas.

Identity and access management tools help companies control user access to applications and resources. Components include user authentication, restrictions, single integrated password sign-on, and account profiles for network applications.

“We are not, at the moment, in the identity management business at all, but it is an area of great interest to us,” said Mr. Thompson at Vision 2006, the company’s ninth annual customer and analyst conference.

Filling the gap is important for Symantec. According to the Radicati Group, the identity management market—which includes secure access, authentication, and federated identity products—will reach more than $1.2 billion in 2005 in worldwide revenue, and grow to over $8.5 billion by 2008.

“It is a clear hole in Symantec’s strategy,” said Graham Titterington, an analyst with the U.K.-based research and consulting firm Ovum.

Shares of Symantec fell $0.39 to $17.37 in recent trading.

Acquisition or Partnership Options

Mr. Titterington said Symantec will most likely make an acquisition or a strong partnership announcement to help it get a foothold here. “All this talk of compliance is meaningless unless you can attribute responsibility to individuals, which requires strong access and identity control,” he said.

Mr. Thompson, however, dismissed suggestions that his company will immediately look to buy an identity acquisition company.

While Symantec may be gung ho on identity management, another area the company has not paid much attention to over the years, encryption, will continue to be peripheral.

Encryption companies, while riding on a strong technology, have faced ups and downs in an unpredictable market that Symantec would prefer to stay out of, said Mr. Thompson.

“Encryption is interesting, and authentication capability is something we would love to have in our portfolio,” he said. “But historically companies that have been strong in this segment have been through highs and lows, and I think I am happy with Symantec’s steady revenues now.”

Beating Microsoft

Symantec also outlined its strategy to compete with Microsoft. Later this year, Microsoft plans to enter the anti-spam, antivirus market (see Windows Security Goes Live). That market forms an important part of Symantec’s revenue stream.

Mr. Thompson said Symantec has a three-pronged plan to stave off the Redmond giant. “We intend to out-innovate Microsoft,” he said. “We know much more about security than they can ever hope to.”

Symantec will leverage its global brand to gain consumer trust and convince users to choose its products over its competitors, said Mr. Thompson.

But that’s not all. Symantec plans to unleash a marketing blitz that will build greater mindshare for the company among potential customers.

“We will invest a lot more money in telling the story of the Symantec and the Norton brands,” said Mr. Thompson. “We have indicated this in our earnings call last quarter, and we will talk more about this during the release of our quarterly results tomorrow.”

Symantec plans to announce its quarterly results for the fourth quarter of 2006 on Tuesday.

Mr. Thompson also said the company remains unperturbed over the $1-billion tax bill levied by the U.S. Internal Revenue Service last month as a result of Symantec’s $10.25-billion acquisition of Veritas (see Symantec Faces Hefty Tax Bill).

“We have an open dispute with the IRS on this and don’t think their position is consistent with the current tax laws,” he said. “So we are running our business with the assumption that this will go away soon.”