It's Apple week! We're examining the world's largest tech company from all angles. Stay tuned to Fool.com all week for full coverage.
Raise your hand if "lack of viruses or other digital threats" is one of the reasons you bought a Mac. Whoa. That's a lot of you.
I understand why. Windows is reputedly more vulnerable than a two-day-old kitten. Apple (Nasdaq: AAPL) has made a good living by selling Macs as not only user-friendly, but also more secure than their PC counterparts.
That job is about to get harder, which poses a huge threat to Apple and its shareholders.
The Web theory of everything
Networks are the problem. Connect any two devices over a network, or enable a device to others on a network, and holes get created. Hackers know this. They use skills and tools probe along network walls, like a prisoner looking for a low clearing along a fence line. Leave a hole, and they'll crawl through.
Web businesses often seem to be most vulnerable to these sorts of attacks. Last year, hackers called the Iranian Cyber Army hacked Twitter, and then in January breached Baidu (Nasdaq: BIDU). In 2008, a different band of digital rogues broke through Comcast's (Nasdaq: CMCSA) subscriber site. All three businesses are probably more secure today, after patching the holes hackers exploited.
If only we could say the same about Apple.
iSecurity, inching along
Earlier this month, a hole in AT&T's (NYSE: T) account-activation procedures for the iPad exposed more than 100,000 email addresses. Today, Gizmodo is reporting that a botched fraud update exposes the personal data of users attempting to upgrade to iPhone 4.
This is a massive problem for Apple. Macs aren't what make the company anymore; iDevices are the growth engine, the future, the raison d'etre for the $246 billion in market cap Apple commands.
Just look at today's action: On a down day for Mr. Market, shares of Apple are up more than 1% on news that users have already ordered more than 600,000 iPhone 4 handsets. Cult of Mac, meet the iEmpire.
Optimists will blame AT&T for these breaches. They're not wrong. But it's wishful thinking at best to believe that Ms. Bell's loophole-closing will solve the issue. It won't, because it can't. Fail-safe systems don't exist in computing.
Once more, consider recent history. A security expert found in routine tests that a powered-off iPhone could be cracked if connected to a PC running the latest version of Ubuntu Linux, even if the device was also password-protected. That's not an AT&T problem, Fool. That's a software flaw. If today's breaches become tomorrow's fond remember-whens, look out below.
A failure of succeeding
Apple's transformation has accelerated with the release of the iPhone and the iPad. Once lucky to move a few million desktops and laptops annually, CEO Steve Jobs is positioning his company to manufacture and sell tens of millions of iProducts each year, building on the more than 52 million iPhones and iPads already out in the wild.
But speed also has a downside. Move too fast, and Apple will leave holes for hackers to exploit, such as the recently discovered Ubuntu iPhone vulnerability.
And let's not forget that there are alternatives to what Apple sells. Should hackers expose iProducts as materially less secure than Research In Motion's (Nasdaq: RIMM) BlackBerry, Motorola's (NYSE: MOT) Android handsets, or Dell's (Nasdaq: DELL) Streak among tablets, Apple's shares would take a hit, as these competitors benefited from the Mac maker's misfortune.
Remember, these are new markets. Apple is a leader now, but its leadership is based entirely on design and perceived performance. There's no incumbent edge; the installed base is too new, with each week bringing new tectonic shifts.
Apple's success is its problem. The more Macs and iProducts there are in the wild, the more hackers will concentrate on them. After all, Apple's machines will be the ones with the data the hackers want.
Here's hoping Apple proves as good on defense as it has been on offense. Shareholder returns depend on it.
Related Foolishness:
- Pay a Dividend, Apple!
- Better Buy: Google or Apple?
- How Big Is the iPad Opportunity?
- 4 Stocks That Apple Should Buy
- Apple Is Not Magic
When will Apple suffer its next breach? Are security concerns overblown? Discuss in the comments box below.
