Microsoft plans to release a test version of a new Internet Explorer browser by the middle of the year. The company says the update should better protects users from scams and malicious code while surfing the web.

Additionally, responding to a surge over the past year in online scams involving spyware, Microsoft has decided not to charge for its antispyware product, Bill Gates said in a keynote address at the RSA Conference 2005 in San Francisco, yesterday.

"We have looked hard at the nature of this problem and have made the decision that this antispyware product will be available at no additional cost to Windows users," Gates said. "I am very excited that we have this technology and it really addresses a burning need for our users."

Microsoft bought antispyware software maker Giant Company Software in December and released a beta of Windows AntiSpyware in January. Until yesterdays's announcement the company had not said whether it would sell the product or give it away. Other companies, including traditional antivirus vendors, offer antispyware products.

With the increasing phishing threats and perhaps competitive pressure, Microsoft has changed its plans for IE. Previously the company's plans called for a new version of the ubiquitous browser to be included in the next version of Windows, code-named Longhorn, due in 2006.

While scant on details for IE 7, Gates said the security enhancements will protect customers against phishing and other malware. The features will also be included in the version of IE for Longhorn.

IE is part of Windows and is used by most web users, but it has a bad security reputation. Other browsers such as Firefox, Netscape and Deepnet Explorer are exploiting that reputation to steal market share. AOL later this week plans to release the first public test version of a new Netscape browser that offers phishing protection.

In his keynote at the opening of the annual security conference, Gates also updated attendees on Microsoft's efforts to build a single website for patches for Microsoft products. A test version of the delayed patching service, dubbed Microsoft Update, is slated to be available next month, Gates said.

On the issue of antivirus protection, Gates reiterated his company's intention to buy Sybari Software and to add its antivirus engine to Sybari's server antivirus product. Gates also said that a consumer antivirus product would be available from Microsoft by the end of 2005.

Microsoft's decision to give away the antispyware products makes sense, but spells trouble for third party spyware companies, said Pete Lindstrom, research director at Spire Security.

"Spyware is a huge consumer issue and it's becoming a bigger enterprise issue, but it's a desktop issue, so it makes sense for Microsoft to (give away antispyware)," Lindstrom said. However, vendors such as WebRoot Software will have to find a way to differentiate. "They're not going to be able to compete on cost," he said.