Why You Should Thank General Petraeus

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Nov 15th, 2012 | By | Category: Featured, High Growth, Technology
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By now, everyone has heard of General Petraeus’s unusually candid letter expressing his resignation. But the event has shed light on one trend that until now was perhaps not as well known. And for this, you can thank the general because it could significantly boost your portfolio in the coming years.

The trend: a rise in demand for companies that specialize in cyber security.

Today, I’m going to show you evidence of a government that’s “probing” into the private lives of the general public. On a more serious note, I’m also going to show you how concerned officials are about cyber-attacks on their electronic networks. But I wouldn’t be showing you both these things, if there weren’t some investment opportunities worth your consideration.

But first, let me back up a bit…

Law enforcement officials told NBC news that the general’s ex-mistress and biographer, Paula Broadwell, is “under FBI investigation for improperly trying to access his email and possibly gaining access to classified information.”

The president was quick to point out in a White House briefing, “I have no evidence at this point from what I’ve seen that classified information was disclosed that in any way would have had a negative impact on our national security”

It’s almost unbelievable that the director of the CIA could have allowed himself to get “hacked”. But still, other officials tell the Associated Press that an FBI investigation led to the discovery of Petraeus’ affair. This all begs an important question for a normal, non-threatening individual like you…

And Computerworld asks it this way:

“The incident, which has shined a spotlight on cyber harassment, online privacy and digital forensics, has left a lot of people wondering if the head of the country’s intelligence community and his girlfriend, a former counterintelligence officer, can’t keep their emails private, do most of us even stand a shot?”

First of all — on the matter of your own privacy — the best way to protect yourself is to simply realize that privacy doesn’t really exist anymore in the electronic world. If you put it in the electronic world, it’s going to get out in the “real world”.

In this couple’s case, the affair was uncovered using Gmail metadata buried in email exchanges.

“Broadwell will now become part of the statistics that Gmail reports in its next semi-annual transparency report on government data requests,” Wired reported on methods the FBI used to uncover the affair.

Let’s take a better look at those statistics…

Google’s sixth bi-annual Transparency Report, released on Nov. 13, shows that the number of government requests to remove or survey content from the search engine’s services steadily increased in 2012.

Google commented in a blog post regarding the Transparency Report that from January to June of 2012, government officials made 20,938 inquiries about 34,614 specific accounts.

See the graph below for government requests to Google, which have increased since the company began releasing this information in 2009:

The amount of content that governments want completely removed from Google’s services has also seen a sharp increase throughout the last six months.

While this statistic has remained relatively steady in previous reports, the company received 1,791 requests to remove 17,746 pieces of content in 2012.

Check out the numbers in the graph below:

The Atlantic was quick to point out that Google doesn’t comply with all of these requests. In the United States, Google said it recently complied with less than 50 percent of these government requests.

But governments’ request for user data is another story. According to the Transparency Report, Google still complies with 90 percent of these orders in the U.S.

This makes it difficult to know who to trust. But one thing is certain from the government’s perspective:

President Obama declared it on the White House website: “cyber threat is one of the most serious economic and national security challenges we face as a nation”.

“America’s economic prosperity in the 21st century will depend on cybersecurity”.

What’s that saying? If you can’t beat them, join them?

In this case, I prefer “follow the money”.

If you want to invest in this trend, the first company worth your time and money may sound counterintuitive: AT&T Inc. (NYSE:T)

According to Reuters:

“Companies will double or triple spending on cybersecurity in the coming years as attacks grow more sophisticated and frequent, creating a billion dollar business opportunity for U.S. carrier AT&T Inc, it said on Wednesday.”

“Attacks on AT&T networks have doubled in the past four months and now tend to be more targeted to evade detection, Frank Jules, president of AT&T’s global enterprise unit, said at the Morgan Stanley TMT conference.”

“We see them on a daily basis and they are now getting smaller instead of coming in huge waves, which were easier for us to detect,” he said.

“Every chief information officer at major corporations that I meet wants to talk about security. I think this will be a $40 billion market one day.”

Besides AT&T, there are two other companies that will take advantage of the rising demand in cyber security. They are:

Northrop Grumman Corporation (NYSE:NOC). Not only do they have a gigantic Information Systems unit that’s a leading provider of layered and “inside the perimeter” security, the company is also a cyber-security research consortium with three universities: Carnegie Mellon, MIT and Purdue. The consortium has developed new approaches to safeguard large-scale information systems and boost the security of cloud computing.

And lastly, SAIC, Inc. (NYSE:SAI). If this company is quality enough for NASA to tap into, it should be for private investors. They tapped SAIC for a $1.3 billion information technology contract to upgrade the space agency’s information systems – a key component of which will include security for those systems.

Sincerely,
Josh Grasmick


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