Cyber Crime on the Rise: Can Cyber Security Firms Reverse The Trend?

(List compiled by Andrew Dominguez. Data sourced from Finviz.)

Around two months ago, Kapitall wrote about the prospects of cyber security firms amidst the ongoing onslaught of cyber-attacks from groups like “Anonymous." The article concludes with a suggestion that cyber security firms might benefit from an increase in cyber defense spending by both private corporations and government organizations.

Several new hacks and numerous arrests later, the outlook on the industry is more complicated than it seemed initially. In the past two weeks alone, the arrest of an eighteen year old “LulzSec” hacker in the remote Shetland Islands and a McAfee probe into a successful five-year, 70+ organization hacking operation, dubbed “Operation Shady RAT,” have exposed the serious flaws of the current cyber defense regime.

One of the big hurdles for the cyber police and the justice system is the movement’s grassroots guise, in large part because many of those that have been apprehended have been idealistic youths.

Although many of the hacks have been of large private corporations, like Sony and Citibank, the arrested culprits have often attempted to deflect criminal allegations on the grounds of political intentions and the individuals’ right to protest.

Diplomacy could also be strained as American firms and government officials have hesitated to identify foreign government cyber espionage units, despite evidence in multiple hacking cases leading to sophisticatedoperators in China. Western governments might be hesitant to pursue any allegations against Chinese spies or Russian saboteurs because of outstanding rumors that Western governments have conducted their own cyber espionage programs, including a rumor that the Stuxnet attack on an Iranian nuclear facility was the product of a joint American and Israeli operation.

Two articles recently published by the Economist reveal the paradoxical state of the cyber security industry.

One posits that the recent arrests and attacks “suggest change is coming to computer security,” while the Babbage technology column asserts that the real problem is the fact that “Firms, governments and other organisations remain complacent…”

The latter point is corroborated by William Maclean’s analysis on Reuters, wherein he argues that many companies are still unwilling to report security breaches because of the surrounding stigma and resulting loss of faith in the integrity of a firm’s digital systems.

As a matter of course, the cyber security industry will have to adapt in order to survive this unrelenting wave of cyber-attacks. Unfortunately, the largest security firms are stuck in the “Security 1.0” paradigm, which managed to secure “fixed devices” but has failed to protect the data that has proliferated on mobile devices and the cloud, according to Brent Bracelin of Pacific Crest Securities (via Bloomberg).

Instead, smaller firms, including start-ups, have been at the cutting edge of next-generation security, and have eaten into the worldwide market share of the top five providers, including Symantec and McAfee, report Dina Bass and Zachary Tracer of Bloomberg. These smaller companies could become takeover targets in the near future as the bigger firms seek to bolster their current technologies, add Bass and Tracer.

To help you contextualize the ongoing evolution of this industry, here is a list of its biggest players. Do you think one of these firms will be the champion in the cyber-war arena?

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List sorted by market cap.

1. Intel Corporation (INTC): Market cap of $115.16B. It acquired McAfee in February 2011. McAfee is one of the largest providers of digital security solutions and has launched an initiative against global cybercrime, including grants and awards for individuals and organizations.

2. Check Point Software Technologies Ltd. (CHKP): Market cap of $13.86B. It is a global provider of IT security solutions known for its firewall and VPN products. The company develops, markets and supports a wide range of software and combined hardware and software products for network security, endpoint security, data security and security management.

3. Symantec Corporation (SYMC): Market cap of $13.8B. It is a Fortune 500 company and is the publisher of the widely used Norton Anti-virus software. Symantec offers security solutions for consumers, small business, and large enterprises.

4. ManTech International Corporation (MANT): Market cap of $1.44B. It is a provider of technology services and solutions for the US Federal Government including the defense, security, space, and intelligence communities. It holds nearly 1,000 active contracts with more than 40 different government agencies.

5. AsiaInfo-Linkage,Inc. (ASIA): Market cap of $1.04B. It is a provider of high-quality telecom software solutions. The company owns 34 patents and has an additional 27 patents pending approval in China and in the United States.

6. IntraLinks Holdings, Inc. (IL): Market cap of $767.08M. It is a provider of Software-as-a-Service (“SaaS”) solutions for securely managing content, exchanging critical business information and collaborating within and among organizations. Cloud-based services are used by clients in industries including financial services, pharmaceutical, biotechnology, consumer, energy, industrial, legal, insurance, real estate, technology, and government agencies.

7. Sourcefire, Inc. (FIRE): Market cap of $688.86M. It provides intelligent Cybersecurity solutions that minimize network security risks for its corporate and government clients. Sourcefire is the developer of widely used open-source and premium intrusion and prevention software.

8. VASCO Data Security International Inc. (VDSI): Market cap of $345.41M. It provides strong authentication and e-signature solutions, specializing in online accounts, identities and transactions. Its client base includes financial institutions and e-commerce and e-government industries.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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