Much was the hullabaloo earlier this year, when Boeing (NYSE:BA) and Northrop Grumman dueled over a $35 billion contract to build flying gas stations for the Air Force. And great was the rejoicing at Lockheed Martin (NYSE:LMT) when it won a portion of a mere $20 billion contract to build a Humvee 2.0 for the Army.

Big numbers, to be sure, but has anyone noticed another project that possibly has even more federal loot on the table? According to one leading expert, the total budgeted to fix this dilemma could reach as much as $50 billion, and President-elect Obama seems eager to give it away.

Cyber, shmyber
A new report from the Center for Strategic & International Studies has been making headlines the past few weeks. It highlights problems stemming from continued penetration of U.S. computer networks by "foreign opponents," and warns that the strategic issue of cybersecurity is "on par with weapons of mass destruction and global jihad." Over the course of nearly 100 pages, the CSIS report offers the president-elect three key conclusions:

  • "cybersecurity is now a major national security problem for the United States"
  • "decisions and actions must respect privacy and civil liberties"
  • "only a comprehensive national security strategy that embraces both the domestic and international aspects of cybersecurity will make us more secure"

What's to be done?
CSIS recommends a comprehensive revamp of the nation's Internet security in both the public and private sectors, using the Bush administration's $15 billion Comprehensive National Cybersecurity Initiative (CNCI) as a starting point. The new plan would be called the Comprehensive National Security Strategy for Cyberspace. (You know it's progress because the acronym is getting longer.) Whereas CNCI focused on hardening the defenses of .gov websites, however, CNSSC would also shore up defenses at private companies whose deficient Internet security imperils citizens' access to water, electricity, telecommunications -- basically, everything that comes to mind when you think of the word "infrastructure."

What's it mean to you?
Ever since Sept. 11, 2001, government circles have been inundated with recommendations to boost security at chemicals factories, nuclear power plants, ports -- to little effect. But here's the thing: The Obama-Biden campaign platform included a commitment to protect our information networks. And D.C.-based market forecaster Input is predicting that spending on IT defense will outgrow overall IT spending nearly 2-to-1 over the next five years, rising perhaps 8% per year through 2013, at which point it will constitute an $11 billion market.

L-3 Communications (NYSE:LLL) and SAIC have recently set up special cybersecurity units to compete with similar businesses at Boeing, Lockheed, and Raytheon (NYSE:RTN). Clearly, Big Defense is gearing up to cash in on this trend. Should you?

One word: Yes!
Whether we're talking $50 billion in government contracts, or $5 billion, or nothing at all, a lot of the companies  best-positioned to benefit from a concerted, public/private push for Internet security already look awfully cheap. Consider a few pure-play Internet security shops that could benefit right alongside the defense giants:

Company

P/E

Price-to-Free Cash Flow

5-year Projected Growth

McAfee (NYSE:MFE)

39

18

13%

Symantec (NASDAQ:SYMC)

17

7

10%

EMC (NYSE:EMC)

14

8

12%

Microsoft

10

11

10%

VeriSign

n/a

9

17%

Source: Yahoo! Finance.

Each of the companies named above has one thing in common: To varying degrees, they're all leaders and invested in the field of Internet security. (Yes, even the perpetually insecure Microsoft finally got religion.) And one other thing: With the exception of Microsoft, they all appear expensive from a basic price-to-earnings-to-growth perspective -- which should keep the Wall Street firms from scooping them up before we can.

Which brings us to the third and most crucial point: With the sole exception of McAfee, these companies range from fairly priced to extremely undervalued when judged not on the earnings they report under GAAP, but on their true cash profitability -- their free cash flow. EMC in particular, with its RSA Security division, looks attractively priced at a P/FCF/G ratio just two-thirds that of its anticipated growth rate.

Foolish takeaway
Even if the CSIS report goes the way of so many other post-9/11 alarm bells, and ultimately comes to naught, a lot of these stocks look attractive in their own right. However, the fact that defense contractors have rushed into the space to compete with traditional Internet security companies is a strong indication this particular national security concern will be met with loads of funding in hand. The potential for profits boggles the mind.

Fool contributor Rich Smith owns shares of Boeing. Symantec and Microsoft are Motley Fool Inside Value selections. The Motley Fool's disclosure policy is immune to computer viruses and eats botnets for breakfast.