It was never supposed to happen, but it did.� In March, hackers breached EMC�s (NYSE:EMC) RSA security unit, cracking the code for the company�s SecureID �two-factor authentication� product.� That gave hackers a key or �token� they could use to crack coded passwords for some of U.S. defense contractors� most top-secret systems.
Last month, Lockheed Martin (NYSE:LMT), Northrop Grumman (NYSE:NOC) and L-3 Communications (NYSE:LLL) all fell victim to these highly sophisticated attacks that used the RSA keys to try to break into secure networks and access critical data.� �
Fortunately, two of the three companies were able to change most of the login passcodes before the hackers came back for their top-secret booty. The breach at Lockheed Martin reportedly was considered more serious.
The sophistication of the RSA breach � combined with an increase in cyber attacks from China � has lit a fire under high-value government and commercial users to expand their layers of security.� After all, the same kind of attack hit Google (Nasdaq:GOOG) in early 2010.
Security experts are in agreement about one thing: there is no single silver bullet that can protect all data from all threats in every environment.� The best approach is to deploy data security solutions in combination � an approach that provides defense in depth.�
And that means added opportunity for companies that specialize in providing high-test, layered solutions for highly secure data and information technology environments.� Obviously, all of these companies have exposure to the larger defense marketplace � and budgets will be pared down over the next few years.� However, secure IT services are seen as one of the few areas of growth in the defense budget for the near term.�
Here are two stocks that could do well with the heightened focus on IT security, and two that may have a little catching up to do:
Hot
Northrop Grumman: Northrop Grumman�s $8.4 billion Information Systems unit is a leading player in the space and offers one of the most innovative approaches to providing layered and �inside the perimeter� security.� The company also is in a cybersecurity 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.� The company�s stock has risen about 8% since mid-March and is now trading at $63.17.
SAIC (NYSE:SAI): NASA recently 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.� Last week, SAIC said first-quarter operating income rose 12% over the same quarter in 2010 to $236 million. �Earnings per share came in at 36 cents — higher than the 33 cents estimated by analysts. The stock, which has been knocked around for the past couple of weeks, may be priced to move.
Lukewarm
Lockheed Martin: Although several companies were attacked, Lockheed had to shut down all remote access to its systems and reissue 45,000 secure tokens.� Security experts contacted by InfoWorld said Lockheed Martin might have been partly to blame because its own login information and passwords were also pilfered (http://www.infoworld.com/t/hacking/lockheed-hack-should-put-the-us-high-alert-329). The stock is trading at $77.38 — about 6% lower than its 52-week high in mid-February.
General Dynamics (NYSE:GD): General Dynamics� decision to lay off 5% of its 10,000 secure information systems workforce due to projected defense budget cuts may hamper the company�s ability to keep up with leading-edge competitors in one of the more critical segments of national security spending.� General Dynamics is trading at $70.70, almost 10% lower than its 52-week high of $78.27 in mid-February.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks mentioned here.
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