Is Microsoft Going to Eliminate Israel’s Cybersecurity Companies?

Until a few years ago, the first thing a responsible PC user would do after buying a new computer was to install antivirus software. There were lengthy discussions on online forums about which free software was better – AVG or Avast – or perhaps it was worth paying for the Kaspersky Lab product.

Today, most people don’t bother to install an antivirus at all. Over the years Microsoft has improved the cyberdefenses built into its operating software, including its Defender anti-virus offering. For the consumer market, the version of Defender inside Windows 10 is certainly adequate.

According to AV-Test, which surveys cybersecurity products, until 2015 Defender was unable to identify 15 per cent of all malware, making it a relatively weak product. But by the end of 2017, Defender’s success rate was close to 100 per cent. One result of this is that online Google searches for antivirus products have tumbled even though the threats, particularly ransomware, have only grown.

Microsoft is now expanding the same strategy it employed in the consumer market, to the business sector. If it succeeds, whole cybersecurity companies may disappear in the coming years in the face of an onslaught by the tech giant from Redmond, Washington. Whether Microsoft pulls its off hinges, to a large extent, on its Israeli research and development center.

Four acquisitions

Early in 2014 Microsoft named Satya Nadella as CEO and he launched the company’s cybersecurity drive. A few months, Microsoft announced that it was buying the Israeli startup Aorato for $200 million. It was the company’s first Israel acquisition in five years and, as it turns out, the beginning of a string of Israeli cybersecurity startup acquisitions.

In 2015, Microsoft bought Adallom for $320 million and Secure Islands for $150 million. Two years later it bought its fourth Israeli startup, Hexadite, for $100 million.

Now under the Microsoft wing, those startups became the core of its local cybersecurity R&D operations.

Microsoft’s Israeli cybersecurity startup shopping spree has cost it $770 million and it’s probably not through yet. “I look at a lot of startups and I wouldn’t be surprised if we didn’t make additional acquisitions. There are areas where we are far from a solution and see a technology gap –  this is where we will invest effort and resources,” Michal Braverman-Blumenstyk, chief technology offers for Microsoft’s cloud and artificial intelligence security division, told TheMarker.

“Microsoft took a strategic decision to dramatically increase its market share in security, and they’re ready to spend a lot of money,” said a source with inside knowledge of the company’s plans who asked not to be identified. “The commitment to this issue comes from Nadella and [Corporate Vice President – Cybersecurity Solutions Group] Ann Johnson. They’re working to ensure that most enterprise security will be based on Microsoft.”