In my last post,, I promised to offer a subsequent entry on why public companies are reluctant to publicize breaches of their corporate networks.
I also suggested that such attacks probably are far more common than we realize. What happened to Nortel likely is occurring to a number of other companies right now.
It’s easy to understand why public companies don’t like to disclose that they’ve been the victim of hacking exploits, especially if those attacks result in the theft of intellectual property and trade secrets.
Strong Sell Signals
As public companies, their shares are traded on stock markets. Not without reason, shareholders and prospective investors might be inclined to interpret significant breaches of corporate networks as strong sell signals.
After all, loss of intellectual property — source code, proprietary product designs, trade secrets, and strategic plans — damages brand equity. Upon learning that the company in which they hold shares had its intellectual property pilfered, investors might be inclined to deduce that the stolen assets will later manifest themselves as lost revenue, reduced margins, decreased market share, and diminished competitive advantage.
Hacking exploits that result in perceived or real loss of substantial intellectual property represent an investor-relations nightmare. A public company that discloses a major cyber breach that resulted in the loss of valuable business assets is far more likely to be met with market dismay than with widespread sympathy.
So, if public companies are breached, they keep it to themselves. If, however, a company is compelled by circumstances beyond its control to make a public disclosure about being attacked, it will downplay the severity and the risks associated with the matter.
In early 2010, you will recall, Google announced that it was subjected to a persistent cyber attack that originated in China. It was part of larger attack, called Operation Aurora, aimed at dozens of other companies.
Some companies acknowledged publicly that they were attacked. Those companies included Adobe Systems, Juniper Networks, and Rackspace. Other companies subjected to the attacks — but which were not as forthcoming about what transpired — reportedly included Yahoo, Symantec, Northrop Grumman, Morgan Stanley, and Dow Chemical.
After the Crown Jewels
At the time of the attacks, Google spun a media narrative that suggested the attacks were designed to spy on human-rights activists by cracking their email accounts. While that might have been a secondary objective of the attacks, the broader pattern of Operation Aurora suggests that the electronic interlopers from China were more interested in obtaining intellectual property and trade secrets than in reading the personal correspondence of human-rights activists.
Indeed, McAfee, which investigated the attacks, reported that the objective of the perpetrators was to gain access to and to potentially modify source-code repositories at the targeted companies. The attackers were after those companies’ “crown jewels.”
The companies that admitted being victims of Operation Aurora all downplayed the extent of the attacks and any possible losses they might have suffered. Perhaps they were telling the truth. We just don’t know.
Transfer of Wealth
Last summer, Dmitri Alperovitch, McAfee’s vice president of threat research, provided the following quote to Reuters:
“Companies and government agencies are getting raped and pillaged every day. They are losing economic advantage and national secrets to unscrupulous competitors. This is the biggest transfer of wealth in terms of intellectual property in history. The scale at which this is occurring is really, really frightening.”
What Alperovitch said might seem melodramatic, but it isn’t. He’s not the only knowledgeable observer who has seen firsthand the electronic pillage and plunder of corporate intellectual property on a vast scale. For the reasons cited earlier in this post, few companies want to put up their hands and acknowledge that they’ve been victimized.
Nortel, in apparently being subjected to a decade-long cyber attack, might have been a special case, but we should not assume that what happened to Nortel is anomalous. For all we know, the largest companies in the technology industry are being violated and plundered as you read this post.