Microsoft plans to release a test version of a new Internet Explorer (IE) browser that better protects users from scams and malicious code. The company has also indicated that it would not charge for the product - but only for individaul consumers.

Announcing the initiative at the RSA Conference, Microsoft chairman, Bill Gates, said; "We have looked hard at the nature of this problem and have made the decision that this anti-spyware product will be available at no additional cost to Windows users. I am very excited that we have this technology and it really addresses a burning need for our users."

Microsoft bought anti-spyware software maker Giant Company Software in December and released a beta of Windows AntiSpyware in January.

In addition to its free consumer product, Microsoft will offer a for-pay anti-spyware product for corporate users that will support enterprise needs for management and deployment, said Amy Roberts, a director in Microsoft's Security Business and Technology Unit. Roberts could not say when the enterprise anti-spyware product will be available.

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.

"We have decided to do a new version of Internet Explorer," Gates said. The new IE 7 will "add new levels of security," he said. A first beta is due in mid-2005.

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 7 will be for users of Windows XP with Service Pack 2. Roberts could not say when the final version of IE 7 would be available.

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, should be available next month, Gates said.

Microsoft Update will support Windows XP, Windows 2000, Windows Server 2003, Office 2003, Exchange Server 2003 and SQL Server, according to Roberts. A final version of the update service is due in the first half of this year, at around the same time the company plans to release Windows Update Services (WUS), she said. WUS is a free Windows Server add-on for businesses that allows users to download and deploy patches.

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

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.

At least one attendee found Gates both more engaging and more humble than last year, when Microsoft's founder declared an intention to end spam within a year - a goal he acknowledged was not met in this year's speech.

"Instead of making promises I didn't believe (Gates) could keep, he was demonstrating substantial improvement in many areas that are important, like internal development processes," said Bruce Schneier, founder and chief technology officer of Counterpane Internet Security.

(Paul Roberts of the IDG News Service contributed to this story.)