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The U.S. has long staked its defense capabilities on being the top-dog in cutting edge military technologies. However, hard lessons learned on the ground in Iraq are now being transferred to our aerial capabilities too; notably, that cheap counter-measures can often offset advanced designs. As The Wall Street Journal reports, U.S. drone communications are being intercepted with cheap off-the-shelf software.
Militants in Iraq have used $26 off-the-shelf software to intercept live video feeds from U.S. Predator drones... Senior defense and intelligence officials said Iranian-backed insurgents intercepted the video feeds by taking advantage of an unprotected communications link in some of the remotely flown planes' systems.
As Foolish defense writer Rich Smith (TMF Ditty) commented, "Seems the Pentagon is following the French "Maginot Line" of excuses -- yeah, we knew they could just go around it, but we didn't think they'd think of that."
Kidding aside, while you'd hope a fix that secures communications would be relatively simple to implement, the problem does highlight the growing threat of cybersecurity. As the military becomes more reliant on advanced data connections, the ability to encrypt and protect that data has become a top priority. Secretary of Defense Robert Gates has warned that the U.S. is woefully underprepared in this arena, as did retired general Wesley Clark in an essay featured in Foreign Affairs last month.
So what does this mean for investors? While the market for defense-related cybersecurity solutions is currently small, it's set to grow at a fast pace. However, many defense companies already derive a large portion of their revenue from information related work (e.g., Lockheed Martin's (NYSE: LMT ) Information Systems & Global Services division accounts for nearly 30% of revenue), maintaining a dedicated presence in this expanding field is a must. Boeing (NYSE: BA ) opened its cyber unit in August of last year, and Lockheed followed suit a couple of months later. Other major contractors such as Northrop Grumman (NYSE: NOC ) , SAIC (NYSE: SAI ) , and L-3 (NYSE: LLL ) are also in the space.
The point is: It's not enough to merely maintain a presence in cybersecurity; look for contractors who are placing the most emphasis on their efforts. While the headline sales figures for cybersecurity might look small, the benefits touch a much larger part of the business.
Care to agree or disagree? Have some thoughts about cybersecurity on your mind? Leave them in the comments area below!