The move could help the software maker extend its footprint in the low-cost PC market, but it might also catch the eye of trustbusters.
As a streamlined offering, Microsoft said the new service -- presently code-named Morro -- will be suitable for use on low-cost, low-powered netbooks that are growing in popularity in emerging markets and in some segments of the North American computer market.
"This new no-cost offering will give us the ability to protect an even greater number of consumers, especially in markets where the growth of new PC purchases is outpaced only by the growth of malware," said Amy Barzdukas, Microsoft's senior product manager for online services and Windows, in a statement.
The definition of malware covers a range of computer threats, including viruses, spyware, rootkits, and trojans. Hackers, many of them connected to organized crime, often use such tools to extract sensitive data such as bank account numbers and passwords from users' PCs.
Microsoft said it will launch Morro in June 2009, at which time it will discontinue the $49.95-per-year OneCare service. Morro will be compatible with Windows XP, Windows Vista, and the forthcoming Windows 7 operating systems, the company said.
"By offering such basic protection at no charge to the consumer, Microsoft is promoting a safer environment for PCs, service providers and e-commerce itself," said industry analyst Roger Kay, president of Endpoint Technologies Associates.
But while users and analysts may welcome Microsoft's offer of free antivirus software, competitors -- such as Symantec and McAfee -- and government competition watchdogs may not. Microsoft could draw antitrust complaints if it integrates Morro so tightly into Windows it makes security software from third parties difficult to install or use.
European antitrust authorities have slapped Microsoft with more than $1 billion in fines, in part for bundling Windows Media Player with the Windows operating system. Microsoft was ultimately ordered to produce a version of Windows for the European market that does not include WMP.
Morro could suffer the same fate if Microsoft doesn't tread lightly in the security market.