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Tech Stocks

Cybersecurity: Two for the Money

By Jason R. Koepke, on Jun. 30, 2015

Game-changing events are rarely new, surprising or unique. When hackers stole 40 million people’s personal and credit-card information from Target Corp (NYSE: TGT), the attack and the techniques used weren’t anything that those in cybersecurity hadn’t seen before.

However, this high-profile breach did change the game: Tech security became worthy of proper C-suite action, significant budget increases and the attention of investors.

The Why and How of Change

Data breaches happen regularly, including ones that affect tens of millions of people. Why does the Target incident matter?

When news broke in December 2013 that customers’ data had been stolen at the point of sale—not some esoteric back-end system, but the credit-card reader itself—shoppers shunned Target’s stores at the height of the holiday season.

The financial and reputational damage suffered by the retailer prompted shareholders and the board to call for a shake-up of the management team. A few months after the incident, the CEO and chief information officer (CIO) obliged, tendering their resignations.

This high-profile breach and its ramifications served as a wake-up call to C-suites everywhere to ensure that the IT department’s security team receives appropriate staffing and funding.

A recent survey conducted by Goldman Sachs (NYSE: GS) found that almost 60 percent of CIOs plan to increase security spending by at least 5 percent, with 20 percent of officers aiming for 15 percent or more.

Besides executives’ instincts for self-preservation, the coming wave of government regulation provides another catalyst for the upsurge in spending on cybersecurity.

Rest assured that the steady stream of headline-making cyberattacks, often enabled by lax security, will be an issue during the upcoming presidential election—especially after a recent breach left the US Office of Personnel Management fumbling to explain how millions of federal employees’ records were left unencrypted.

With Congress ready to start legislating and corporations motivated to avoid the negative publicity, business disruptions and lost customers associated with data breaches, now is the time to add exposure to the coming cybersecurity boom.

But you’ll need to be selective. With all the venture capital money sloshing around in Silicon Valley, it’s also a bull market for hucksters claiming to sell steak when all they have is sizzle.

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