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Friday Tech Blitz: Another Huge Merger Underlines New Cyber Warfare Strategy

It hasn’t taken long for the first big takeover deal of the year to happen. And it comes in an area where concern continues to rise – online security.

With that in mind, top cyber security firm, FireEye (FEYE), has splashed out $1 billion to buy fellow cyber-crime company, Mandiant. You may recall that Mandiant made a few enemies within the Chinese government last year when it alleged that its military branch had secretively stolen data from over 100 companies around the world.

It’s one of the largest deals in the sector – and investors in the recent Wall Street debutant (FireEye went public in September 2013) loved it. Shares spiked 38% higher after the announcement, hitting an all-time high above $57 in the process.

The full buyout follows a technology development agreement between the two firms last year and “will enable us to innovate faster, create a more comprehensive solution, and deliver it to organizations around the world at a pace that is unmatched by other security vendors,” according to FireEye CEO, David DeWalt.

Specifically, FireEye brings expertise in malware detection, while Mandiant’s team specializes in solving security breaches.

It’s also a response to a recent spate of merger activity within the cyber-security area. For example, Cisco (CSCO) set the bar high in October when it bought Sourcefire for $2.7 billion last October.

Having Mandiant in the fold should only help boost FireEye’s already-strong performance.

The company says 2014 revenue will now vault to between $400 million and $410 million – up from the 2013 full-year estimate of $159 million to $161 million. FireEye also revealed that fourth-quarter revenue will fall between $55 million and $57 million – $1 million to $6 million higher than previously expected.

The deal comes as cyber-security fears have cranked higher again…

Snap-Hack

Fresh off the news that hackers breached Target’s (TGT) payment system and gained access to 40 million customers’ account details, fellow online criminals infiltrated photo-messaging app, Snapchat.

In all, they downloaded the usernames and phone numbers of 4.6 million users, who then published the data on a website called SnapchatDB, except for the last two digits of the phone numbers. Why?

Well, your guess is as good as mine! They can’t actually do much with the data in terms of making money from it. But it proves yet again that a well-known firm has had its defenses breached.

It came despite a warning from Gibson Security that Snapchat’s app was vulnerable to an attack on Snapchat’s “Find Friends” facility, which allows users to search for friends via their phone number.

Trouble is, the hackers were able to steal these numbers. And coincidentally (or not), they said they’d exploited the very same security flaw that Gibson noted last August.

And while Snapchat says it has addressed its data protection, Gibson says it hasn’t and the hackers said any changes are simple to bypass anyway.

Now, Snapchat has moved to reassure its users by saying that only phone numbers were compromised, not actual photos.

It’s also vowed greater communication with security firms like Gibson and promised further improvements to “Find Friends” that would allow users to opt out and make it take longer for hackers to steal phone numbers. However, the company hasn’t said when the update will be available.

It’s all pretty embarrassing for a company whose business model is all about discretion and protecting users. Any snaps sent are erased within 10 seconds of being viewed.

It’s hugely popular, too. There are now over 100 million active users, who send 350 million pictures every day. That’s up from 150 million photos in April 2013 and 200 million last June.

Just another example that while we live in a highly convenient digital world, its perils are clear and present – and will be for the foreseeable future. The consolidation within the cyber-security area underlines its importance and that companies are teaming up to tackle the problems.

Ahead of the tape,

Martin Denholm

Martin Denholm

, Managing Editor

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