In the Internet era, cyber warfare is growing on a global scale.
Corporations, governments, armies, and anonymous groups of thrill-seeking hackers are playing a perpetual game of cat and mouse.
For that reason, worldwide spending on network and data-security technology will rise to more than $10 billion by 2016 from about $6 billion last year, according to a market-outlook report by technology-forecaster ABI Research.
Another recent study, by Forrester Research Inc. (Nasdaq: FORR), found that the share of business IT budgets devoted to security nearly doubled from 7% in 2007 to an estimated 14% last year.
If you're wondering what's behind this growth, you need look no further than some recent newspaper headlines.
Earlier this year, hackers infiltrated Sony Corp.'s (NYSE ADR: SNE) PlayStation Network and accessed the personal information of 77 million accounts in what's considered the biggest such security breach in history.
That was followed this summer by phone-hacking scandal at British tabloid The Daily Mirror that wreaked havoc on News International, media mogul Rupert Murdoch's British newspaper arm.
And finally, this past weekend Sesame Street's YouTube channel was compromised, and hardcore pornography videos displaced the likes of Elmo and Cookie Monster.
Of course, all of this is harmless troublemaking in the grand scheme of cyber warfare.
Indeed, a well-coordinated cyber attack on U.S. military installations or the country's power grid poses an even greater threat to stability.
And it's clear that that threat comes primarily from China.
U.S. officials blame China's government, or agents acting on its behalf, for the theft of neutron bomb designs, the defense secretary's e-mails, and private sector intellectual property worth billions of dollars.
Indeed, the Financial Times recently reported that the People's Liberation Army (PLA) already has partnered with China's private sector to form "cyber militias," units of young computer programmers tasked with cyber attacks and cyber defense.
For instance, Nanhao Group, a Hengshui-based technology company that makes educational hardware and software, has been home to a PLA-sponsored cyber militia since 2005, according to The FT.
"All staff under 30 belong to the unit," Nanhao Vice President Bai Guolian told the paper.
Bai confirmed that its cyber militia unit was led by the local PLA command and has "regular exchanges" with it, training PLA officers. Asked whether the group would carry out cyber attacks, he said: "That has nothing to do with you."
The Nanhao cyber militia is one of thousands, The FT said.
Indeed, the PLA first made cyber security and espionage a priority in 1999 and has been collecting external talent for its operations since 2002. In addition to its cyber militias, the PLA sponsors information warfare research and hacking competitions at universities.
That has the United States and other Western countries playing catch-up.
The Business Roundtable (BRT) - an association of leading U.S. companies with more than $6 trillion in collective annual revenue and employing more than 14 million workers - just last week put forth a plan to develop along with the government a more modern approach to cybersecurity.
The report, "Mission Critical: A Public-Private Strategy for Effective Cybersecurity," called for a collaborative effort by the departments of defense and homeland security, as well as the greater intelligence and diplomatic communities, to better protect businesses and national security.
"Protecting the United States from constant cybersecurity threats requires seamless, ongoing private-public sector coordination and planning," said Randall Stephenson, chairman and CEO of AT&T Inc. (NYSE: T). "Business Roundtable's plan calls for a flexible policy approach that establishes the government's critical role and encourages companies to continuously innovate and invest in advanced network technologies."
Businesses worldwide lose a staggering $221 billion a year due to data theft. Americans are affected to the tune of $54 billion.
Still, these random attacks by rogue hacking collectives pale in comparison to China's coordinated efforts to acquire intellectual property by any means necessary.
"I don't believe that there is precedent in history for such a massive and sustained intelligence effort by a government to blatantly steal commercial data and intellectual property," House Intelligence Committee Chairman Mike Rogers, R-MI, said earlier this month at a hearing on cybersecurity.
Google Inc. (Nasdaq: GOOG) in June said hackers in China tried to hack into the Gmail accounts of hundreds of journalists, Chinese activists, and U.S. government officials.
"That's just the tip of the iceberg," Rogers said. "There are more companies that have been hit that won't talk about it in the press, for fear of provoking further Chinese attacks."
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Investors might consider the following five stocks:
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