The tools for consumers and businesses will compete directly with existing products from the likes of Symantec Corp., McAfee Inc. and others, all of which have been profiting for years from Microsoft vulnerabilities and the hackers who target them.
"It will be a battle, but (security companies) have been expecting this to come for a while and they're prepared for it," said Bruce Schneier, founder and chief technology officer of Counterpane Internet Security Inc.
Vincent Gulloto, vice president of McAfee's Antivirus and Vulnerability Emergency Response Team, said his company currently has a partnership with Microsoft and "we have all intentions to maintain it."
Symantec also plans to continue partnering with Microsoft, but noted the software giant hasn't released details on how it's going to jump into the market, Symantec said in a statement.
"As long as there is (a) level playing field, we welcome that competition," the statement read.
Gates also said Microsoft would begin testing this summer an update to its Internet Explorer browser, version 7. The update, mainly security-related improvements, would be available only to users of the latest version of Windows - XP with last summer's Service Pack 2 upgrade, which also came with security improvements to IE 6.
It also will be bundled with the next version of Windows, code-named Longhorn.
The company did not mention any non-security improvements such as features found in rival browsers like Mozilla Firefox and Opera.
AP Technology Writer Rachel Konrad in San Francisco contributed to this report.