War is an extremely difficult time for so many people; images of advancing tanks and mortar explosions in Ukraine dominate the news.
But beneath the surface, a new war is subtly raging.
- I'm talking about a digital war that's set to make cybersecurity the next frontier.
According to an announcement on Monday from researchers at Microsoft (MSFT), several Ukrainian military, civilian and government agencies have come under cyberattack.
- This exemplifies the need for one major backbone of the modern global economy: cybersecurity.
Often, the concept of digital transformation becomes a catchall for cloud computing and software-as-a-service (SaaS) platforms like Salesforce.com (CRM), ServiceNow (NOW) and MongoDB (MDB).
In a perfect world, all these tools would run seamlessly on top of bulletproof foundational networks like Amazon.com's (AMZN)Amazon Web Services (AWS), Microsoft Azure and Google Cloud.
But in reality …
- It's far more complex. State-sponsored hacking groups out of China, North Korea and Russia are using sophisticated tools to embed malware deep inside the biggest networks.
In many cases, malicious code can go undetected for months, infecting millions of computers.
And we've seen the devastating impacts that can transpire when the wrong information gets into the wrong hands.
- As recently as this past May, the Colonial Pipeline was devastated by cyberterrorists.
The 5,500-mile pipeline transports 100 million barrels per day (bpd) of gasoline and other fuel products to the eastern United States.
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Attackers distributed malware through email, then demanded a ransom to restore services.
Two months later, Energy Secretary Jennifer Granholm said that bad actors gained the ability to shut down the U.S. power grid.
The Ukraine threat promises to be far worse … and we're seeing the horrific situation play out as we speak.
Wars in the Digital Transformation Era
Microsoft's Threat Intelligence Center found that the country's digital infrastructure came under attack hours before the first Russian missile was launched.
The offensive targeted key civilian digital networks for finance, emergency response, agriculture and energy, as well as Ukrainian military and government agencies.
Interruption could immobilize large parts of the physical support structure across the country, including banking, food production and distribution, electric utilities and defense.
The potential impact would be devastating.
The blog post also notes that cyberattacks are trying to steal a wide range of information, including personal health, insurance, transportation and government data sets — a potential precursor to election security issues.
Corporations are waking to cyber threats, too.
The 2021 Gartner CIO Agenda survey found that cybersecurity was the top priority for new spending.
Of the 2,000 chief investment officers who participated in the survey, 61% planned to increase spending.
And where's all that cash going?
One spot is cyber-defense champion CrowdStrike Holdings (CRWD).
Cybersecurity Will Be Even More Vital
CrowdStrike is a fast-growing endpoint security provider.
Based in Austin, Texas, the company serves enterprise and government clients through a cloud architecture.
Its software collects threat data across all the connected devices, analyzes the information in the cloud using artificial intelligence, then seamlessly updates all endpoints.
CRWD's software was especially useful during the pandemic when CIOs were forced to harmoniously provide security to thousands of new devices.
And CrowdStrike works across smartphones, laptops, tablets, desktop computers and servers.
- It was the perfect cybersecurity for the connected world that grew out of the work-from-home era … which is our new world.
Shares have come under pressure since November 2021 when they reached a high at $300.
At the current price of $195.21, the stock trades at 214 times forward earnings.
While that number may seem lofty, keep in mind that the business is not slowing. It's growing fast and gross margins are expanding.
- Sales surged from only $250 million in 2019 to $870 million through 2021.
Executives project $1.2 billion in revenues during 2022. Gross margins growth has been more impressive. Margins rose from 35.5% in 2017 to 54.1%, 65.1%, 70.6% during 2018, 2019 and 2020, respectively.
The Russian invasion of Ukraine has changed the narrative about cybersecurity.
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CIOs know they must pick up investments … and they will. Firms like CrowdStrike seem to be in the right place at the right time.
Remember to do your own due diligence before buying anything.
Best wishes,
Jon D. Markman
