When Chinese agents penetrated the computers of the Obama campaign during the recent election season and stole many sensitive files, they pretty much guaranteed that the nation’s next president would make cybersecurity a national priority. Obama has done precisely that. Not only is a “comprehensive national cybersecurity initiative” being funded to the tune of several billion dollars per year, but a Cyber Command has been established at the headquarters of the National Security Agency in Maryland and the Department of Homeland Security is putting much more effort into protecting civil and commercial networks. However, these efforts barely begin to address the challenge of securing intelligence networks, financial systems, utility grids and medical records in the information age; the market for cybersecurity hardware and services will exceed $100 billion in the next decade.
The problem that investors face in trying to benefit from this trend is that government programs are the biggest source of demand, but they’re all secret. For example, ManTech International may be better positioned in the non-defensive facets of computer network operations than any other company in the sector, but it isn’t talking. And while other companies like Northrop Grumman and GD have established broad franchises in computer network defense, offense and exploitation, their cyber activities are subsumed in the operations of bigger business units engaged in a range of other activities. A further complication is that some companies are re-labeling information technology workers as cyber specialists in a manner that obscures the true scale of their cyber revenues.
With so many companies rushing into cyber, it’s obvious that they aren’t all going to be happy with how they fare. General Dynamics — which traces its dealings with NSA back to the old Bell System/Western Electric days — is going to do fine, because it knows the technology and players very well. A recent FedSources analysis of publicly available information ranked GD number one in the field, due partly to its dominant role in encryption devices. Northrop has positioned itself nicely by anticipating rising demand in advance of competitors and acquiring key players like Essex. And ManTech’s special competencies make it a likely winner, whether it grows or is acquired.