The effect of computer virus occurrence and virus threat level on antivirus companies' financial performance

Computer virus incidents jumped 140 percent from May 2000 to May 2001/sup 1/. The international computer security association labs 8/sup th/ annual survey has determined that 1.2 million computer virus incidents occurred in more than 900,000 computers in the year 2002/sup 2/. The antivirus market place has grown by 31 percentage revenue growth from 2001 to 2002/sup 3/. Even though enterprises are dedicating more resources towards virus protection, there has not been a significant reduction in the frequency of viruses disrupting their business processes. At the same time, there is increasing investment by antivirus firms in developing antivirus software. A preliminary review of the literature indicated that there has not been adequate research analyzing the business side of computer virus outbreaks- while spending on antiviruses has increased, so has the frequency of computer viruses occurrence. This working paper assesses such business problems by looking at a few antivirus firms' financial performance dependency on computer virus occurrence and its associated threat level. This research investigated the frequency of computer viruses, their magnitude, and the responsiveness of antivirus firms in eradicating the virus outbreak. The analysis uses antivirus firm stock price and computer virus occurrence as proxies for business success. The preliminary finding includes a direct linkage between antivirus firm financial performance and computer virus occurrence.