Apple (AAPL) found itself in hot water this week after allegations arose that its iCloud servers had been hacked. The breach targeted celebrity photo streams and ultimately resulted in nude photos of celebrities, including Kate Upton and Jennifer Lawrence, being leaked to the public. As has been reported, all photos were stolen directly from celebrity iCloud accounts after having been transferred from mobile devices.
For Apple, its customers, and its shareholders, this news is extremely concerning. However, on a positive note, Apple did confirm that its server infrastructure was not infiltrated. Instead, hackers gained access to the private accounts via relatively simple software. The combinatory software ran an algorithm that systematically tested different username and password combinations, until determining a correct match; in this case, the program also deciphered answers to account security questions. Inevitably, this software, allowed the hackers to gain access to private accounts and, ultimately, private photos (which were subsequently released).
While the cyber attack was nowhere as bad as initial reports indicated, the breach exemplifies cyber security concerns. As industries become increasingly automated, and evermore data is saved on servers, customers rightly expect companies to protect their personal information. As a result, this demand has spawned a cyber security boom in which three companies are leading: Cisco (CSCO), Palo Alto Networks (PANW), and FireEye (FEYE).
As the seriousness of hacking attempts increases, in addition to the development of new software/malware, the need for cyber security solutions is quickly growing. After Apple's security breach, both Palo Alto Networks and FireEye experienced a +5% jump in their share price. Especially in the wake of both the Target (TGT) and Home Depot (HD) credit card breaches, companies are increasingly concerned about their susceptibility to cyber attacks (any hack will most likely decrease stock price and lessen customer trust). Therefore, all major financial, retail, and E-Commerce companies are willing to pay a premium for protection. For example, as was earlier mentioned, Target's credit card breach, in which millions of credit card numbers were stolen, prompted the retail giant to update its security infrastructure; not surprisingly, this led to a huge jump in FireEye's stock price.
Although cyber security, on the surface, may not appear as glamorous as other tech sectors (like cloud and big data analytics), it is a lucrative market with infinite upside. Currently, corporations and hackers are in a race to see who can maintain a competitive edge. New attacks trigger security updates, and back-end solutions allow cyber security firms to adapt, and evolve, to potential threats. Although pricey, cyber security stocks are sound investments, as the market remains relatively untapped. There is no doubt the demand for high level security solutions will increase and as other tech products are released, so too will new cyber security platforms.