TiVo Reports Database Compromise - Analyst Blog

A developer of advanced television services including digital video recorders (DVR), TiVo Inc. (TIVO), announced that its third-party marketing vendor, Epsilon has been impacted by a massive security breach.

TiVo has warned its customers not to provide any personal information to anyone sending e-mail using the company’s name.

According to TiVo, Epsilon’s database including e-mail addresses of some TiVo customers was hacked by an unauthorised person.

TiVo employs the marketing services of Epsilon, a unit of Alliance Data Systems Corp. (ADS), which sends more than 40 billion emails annually and has more than 2,500 clients including seven of the Fortune 10 companies.

According to TiVo, Epsilon does not have access to service or credit card details, so all such data remains secured. However, TiVo will conduct its own internal investigation in order to verify (JPM)Epsilon’s information.

Banking and retail hotshots JP Morgan Chase & Co. (JPM), Citigroup Inc. (C), Capital One Financial Corp. (COF)and Kroger Co. (KR) were the other victims of this security breach. Drugstore chain Walgreen Co. (WAG) and specialty apparel retailer New York & Co. were also affected.

Epsilon is conducting a full investigation and reported that the breach happened on March 30, 2011.

The wide-ranged sophisticated computer attacks reflect the growing risk that companies and governments face from cyber crime. Countries are concerned regarding the growing number of attacks on information technology systems as hackers look to steal data, intellectual property, money and even sensitive government information.

Most recently, EMC corp. (EMC) reported a highly sophisticated cyber attack using a method called “advanced persistent threat” (APT) to extract information about its RSA product used to secure web-based services, called SecurID two-factor authentication.

This is the same type of attack that compromised systems at Google Inc. (GOOG) and as many as 100 other companies in late 2009.

IBM Corp.’s (IBM)latest X-Force 2010 Trend and Risk report mentioned more than 8,000 new vulnerabilities, a 29.0% increase from 2009.

Web applications continued to be the category of software affected by the largest number of vulnerability disclosures, representing 49.0% in 2010. According to IBM’s report, a targeted attack technique known as “spear phishing” grew in importance in 2010.

The IBM X-Force report stated that in 2010 nearly a quarter of all financial phishing emails targeted banks located in Europe. It also identified the UK, Germany, Ukraine and Romania among the top 10 countries sending spam in 2010.

According to the UK security minister, cyber attacks on government, businesses and individuals are expected to have a yearly impact of at least £27.0 billion on the country’s economy.

In the recent past, US Corporations were favorite targets for hackers. According to cyber security firm McAfee, Chinese hackers had hacked US fuel companies for years. The campaign, codenamed “Night Dragon” has been in full effect since 2009 and could have begun as early as 2007.

According to M86 security labs, the exploding smartphone tablet device market, the rise in online banking and a shift from using simple exploit kits to more sophisticated Malware-as-a-Service (Maas) model by hackers are the primary concerns for 2011.

Recommendation

We believe this security breach at Epsilon will have no significant effect on TiVo’s business in the near term. However, we expect TiVo to adopt new security solutions that will increase its operating expenses, thus hurting its profitability over the long term.

Moreover, TiVo may also stop using third-party marketing services to tackle security concerns. However, this will be an additional burden and can hurt its core operations going forward.

We maintain our Neutral rating over the long term (6-12 months). Currently, TiVo has a Zacks #4 Rank, which implies a Sell rating on a short-term basis.

TiVo Reports Database Compromise – Analyst Blog

SIGN UP TO NEWSLETTER

Free E-Book

Recent Posts