Investors in anti-virus software maker McAfee (NYSE:MFE) could use good news for a change. Monday may have brought some with the announcement that the company acquired Onigma, a provider of data protection services. Management says the deal is part of its strategy of offering customers "a comprehensive security risk management approach to managing security and compliance."

What's that? The news reeks of irony? Of course it does, Fool. Two former top McAfee executives are no longer around, thanks to stock options shenanigans that could cost $150 million via ten years' worth of restated earnings. A formal SEC investigation is underway.

Still, there's a business case to be made for McAfee's latest move. Small firms pay through the nose for compliance; roughly 2.55% of revenue for those with sales under $100 million during 2004. No specific reasons are given for that figure, but my reading of IT journals suggests that a lack of efficiency and automation is at the very least a major contributor.

Enter software in general, and McAfee specifically. The firm is slowly building its expertise in compliance software, including this week's purchase of Onigma, a firm that specializes in the protection of confidential data, for $20 million.

Now, here's the bad news: Smart as McAfee's acquisition appears to be, it does absolutely nothing to change the investing thesis for the stock. Compliance software is at least as competitive a market as security software is.

And perhaps even more so. Think about it: Instead of facing off versus just Symantec (NASDAQ:SYMC) and Microsoft (NASDAQ:MSFT), McAfee must now defend against every software and services firm that has a client with a compliance problem. Ask BearingPoint (NYSE:BE) and Accenture (NYSE:ACN) how much business they'd like to give McAfee. How about zero?

That's really the bottom line. McAfee's stock might be worthwhile if its competitive position had materially improved, or if its balance sheet offered greater protection than rivals, or if its multiple to expected earnings looked comparatively cheap. But exactly none of that is true today. Steer clear, Fool.

We'll comply with your wishes for related Foolishness:

  • McAfee keeps beefing up its security citadel, which is good.
  • What would be better is to see management stop deferring to bad options.

Accenture, Microsoft, and Symantec are all Motley Fool Inside Value selections. Ask us for anall-access passto the service and you'll be privy to chief advisor Philip Durell's best picks, which collectively are beating the market by more than 4% as of this writing. You'll also receive instructive lessons on valuation and company analysis. Give Inside Value a try; it's free for 30 days.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this story at the time of publication. Get the skinny on everything Tim is invested in by checking his Fool profile. The Motley Fool's disclosure policy is a real bargain.