Antivirus software maker Symantec (SYMC) saw its market value drop by $1.7 billion early Thursday, a day after the company's first-quarter earnings fueled fears that smaller competitors are eating into its customer base.

The company, which makes the Norton antivirus software, as well as security and information management products for large businesses, isn't alone in being squeezed by almost frozen corporate tech budgets. But analysts see increasing evidence it's losing share to smaller competitors, like McAfee Inc. (MFE), in the small to mid-sized business space. Many of them remain unconvinced the company's move to offer storage and information management products to large companies is the right strategy.

At around 1:20 p.m. EDT, Symantec's shares were trading 12%, or $2.07, lower at $15.17, among a handful of lower tech stocks.

"We believe Symantec ... faces competitive challenges from McAfee which has contributed to market share losses, especially in the small and medium enterprise segment," Israel Hernandez, an analyst with Barclays Capital, said in a client note.

Symantec's performance is worrying because security products have generally held up better than other parts of the technology economy because companies need to guard against viruses, data theft and other threats. McAfee, which is about half Symantec's size by revenue, has struck deals deals with computer manufacturers like Dell Inc. (DELL) and Lenovo Group Ltd. (LNVGY) to bundle its products, which may be helping it gain market share. The rise of smaller, free or nearly free antivirus makers could also be hurting Symantec.

Separately, Wall Street is still unconvinced that Symantec's 2005 acquisition of data management specialist Veritas has generated value.

Wednesday's earnings suggest that Symantec is still facing challenges in its two core business lines, security and data management tools. Symantec said profits for the quarter ending July 3 fell by almost 60% compared with the year-earlier period, on lower revenue.

The earnings highlight the pressure on Symantec Chief Executive Enrique Salem. Salem, who took the helm in April, told investors in June that his key priorities were increasing market share in the small and medium-sized business market and better integrating the sales of the company's various products.

Symantec, after Thursday's sell-off, trades at approximately 10.4 x forecast current year earnings, compared with McAfee's 17.8. While investors remain broadly positive on Salem, they will likely need to see significant improvements in revenues and stabilization in market share before the stock gains any meaningful traction.

McAfee reports its second-quarter earnings later Thursday.

-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com