Data security has been one of the hottest areas in technology since late 2012 when the New York Times discovered suspicious network activity and called in Mandiant to investigate and halt the attacks. This attack coincided with the timing of an investigation into the business activities of China’s Prime Minister, Wen Jiabao. The paper had reported that Wen Jiabao’s family had built a vast fortune worth several billion dollars via through a host of different business dealings, some with the Chinese government.
Mandiant was able to track down the source of the hackers back to a group in China that had ties to the Chinese military!
However, Journalists aren’t the only ones under attack. Last year, Target and Neimen Marcus had massive data breaches that resulted in large scale losses of customer information. Earlier, this year, the entire Bitcoin currency was nearly wiped out over hacking attacks.
The Niemen Marcus attack left 1.1 million customers vulnerable, and since that attack, 2,400 of those credit cards were used fraudulently. But this was nothing compared to Mt Gox, theft of the virtual currency actually wiped out the whole company. A hacker even went so far as to post anonymous customer balances on CEO Mark Karpeles’ blog. The Target attack did not result in any theft but it led to the chief information officer being forced to resign. The problem of data breaches has high costs and isn’t going away.
The banks may be next. The Federal Financial Institutions Examination Council recently said it had seen a rise in the number of denial-of-service attacks on bank websites. These types of attacks can be a way of distracting the IT personnel when trying to mask attacks in other areas of the system. Is this the practice run for a much larger scale attack in the near future?
Unlike many areas in technology, data security is one of the few that isn’t subject to wide seasonal or cyclical fluctuations. On top of this, attacks seem to be increasing in regularity and ferocity.
Antivirus software used to be the way companies would try and solve such a problem. Symantec, McAfee and Trend Micro have been the way to protect against desktop intrusion, but as attacks become more network-based, funding is being shifted from the traditional anti-virus solutions toward more network-based technology.
The best positioned company in network based security services is FireEye. It recently acquired Mandiant, the company that the NY Times called on to resolve its hacking issues at the end of 2012. Initially, shares of FireEye doubled and ran up to nosebleed levels after the acquisition was announced. Shares reached a peak of $97.35 on March 5 but that was shortlived. Since then, the price has dropped as much as 49%.
Shares of FireEye still aren’t cheap yet but they will be. Right now, analysts expect $410 million in revenue for 2014 but after the company has had a chance to educate the salesforce on the new product lines, this revenue number will go up. It may be after the company reports March quarter earnings or it may June or September. Being ready to take advantage of this opportunity when it presents itself could net an investor large profits.
Knowing the direction longer term is important but knowing the timing can make the difference between a good and a great investment. Two of the issues we discuss in our premium service, Tech Stock Jackpot, are the exact day and price levels for making the trade. We also discuss the ways to use long term options to enhance these returns.
Tracking the Jackpot,
Tom Anderson.
