Think of the biggest threats to the U.S. and you might envision bombs or planes. But as the country increasingly relies on information technology for everything from sharing computer data to cell-phone communication and, now, to managing the electric grid, the danger of cybersecurity breaches also has grown exponentially. Cyber threats have become a major national-security threat, and given the widespread applications of IT, perhaps even the most potentially harmful one.
And as the strategists at the Pentagon and federal intelligence agencies are looking all at the scenarios -- and trying to find ways to avoid the nightmare possibilities -- the large defense operators are finding a big market opportunity in cybersecurity. Just look at Boeing (BA). The company Wednesday agreed to purchase Narus, which is developing technologies to protect Internet protocol (IP) networks from attacks, for an undisclosed sum.
Narus at a Glance
Based in Silicon Valley, Narus got its start in 1997 and raised $98.7 million in six rounds of venture capital to develop its complex technologies.
All that cash helped Narus to become a leader in real-time traffic intelligence protection for IP networks. It claims to be the only company that can do this with a single, flexible system. The company says its technology enables its customers take action more quickly, a critical advantage considering that many attacks need an immediate response.
As a result, Narus has accumulated a list of top-tier customers, including KDDI in Japan, Raytheon (RTN) in Massachusetts, Telecom Egypt (ETEL), Reliance in India, Cable and Wireless in the U.K., Saudi Telecom (STC) and U.S. Cellular (USM) in Illinois.
Narus's financial details are sketchy, as is often the case with a privately-held business. But the company does have roughly 150 employees.
The Big Picture
Over the years, Boeing and Narus have worked together as partners. In other words, there should be a smooth transition into a single company.
What's more, Boeing needs a comprehensive system, not something that's pieced together with various partners, and keeping it in-house should help. Keep in mind that last month Boeing shelled out $775 million for Argon ST (STST), another player in the cybersecurity market.
All in all, Boeing's aggressive acquisition strategy is spot on. It's clear that much of the opportunity in the Pentagon budget will come from cybersecurity: The federal government is launching a massive new program called "Perfect Citizen" to deal with cyber threats, according to The Wall Street Journal.
The initiative will doubtless require the kinds of technologies from cutting-edge providers like Argon and Narus. And, in light of the growth potential, it's likely that Boeing has not ended its dealmaking.
Basics of Diversification
Learn one of the fundamental concepts of building a portfolio.View Course »