Symantec Corp. and other cybersecurity companies stand to gain from President Barack Obama’s push to increase computer network protection in the private sector and U.S. agencies.
Obama called on lawmakers Tuesday in his State of the Union speech to pass legislation to combat cyberattacks and authorize military force against Islamic State terrorists. These proposals might receive bipartisan support from the Republican-led Congress.
Multinational banks including JPMorgan Chase & Co. are on the losing end of Obama’s plans, although Republicans in Congress have rejected a plan to impose a new tax on financial institutions with assets of more than $50 billion. The Jan. 17 proposal was declared dead on arrival by Senate Banking Committee Chairman Richard Shelby, an Alabama Republican.
Companies that provide cybersecurity or surveillance work to U.S. agencies, such as No. 1 government contractor Lockheed Martin Corp. or Northrop Grumman Corp., would be among the big winners in any increase in government spending.
Security software vendors including Palo Alto Networks Inc. and Checkpoint Systems Inc. also would benefit, according to a review by Bloomberg Intelligence senior analyst Brad Barker.
“The new Congress is likely to act on cybersecurity,” said Barker, pointing to breaches at companies including Target Corp., Home Depot Inc. and Sony Corp.
Obama has proposed giving companies legal protection for sharing information about hacking threats with each other and the government. He also wants to require companies whose consumer data are breached to notify customers who are at risk.
‘No Hacker’
“No foreign nation, no hacker, should be able to shut down our networks, steal our trade secrets, or invade the privacy of American families, especially our kids,” Obama said in his speech. “We are making sure our government integrates intelligence to combat cyber threats, just as we have done to combat terrorism.”
Obama pressed Congress to authorize military action against Islamic State extremists, saying the U.S. can defeat them without being “dragged into another ground war in the Middle East.”
Republicans who lead Senate committees, including John McCain of Arizona on Armed Services and Bob Corker of Tennessee on Foreign Relations, have said they want to know more about Obama’s strategy as Islamic State consolidates control over territory in Iraq.
Budget Request
Obama didn’t ask Congress for additional U.S. agency funding in his address.
The president is expected to request as much as $68 billion more for U.S. agencies in fiscal 2016, according to two people familiar with the administration’s proposal. The increase, split between national security and domestic needs, will be detailed in the budget proposal Obama sends to Congress on Feb. 2.
Top federal contractors including Lockheed, General Dynamics Corp., Northrop Grumman and Raytheon Co. are likely to gain from any boost in agency funding, said Brian Friel, an analyst with Bloomberg Intelligence.
“If federal spending overall goes up, then federal contract spending goes up,” Friel said in a telephone interview. “A rising tide lifts all boats and you tend to see the largest contractors benefit.”
Boeing Co. isn’t as dependent on government sales because of its commercial aviation business. It’s the second-largest federal vendor, according to a Bloomberg Government list of the top contractors published last year.
Tax Breaks
Obama would pay for some increased spending and tax breaks for lower- and middle-income families through the bank tax proposal and a plan to reward companies that invest in the U.S. and curb incentives for those that keep profits abroad.
“Let’s use those savings to rebuild our infrastructure and make it more attractive for companies to bring jobs home,” the president said.
The accumulated foreign earnings of Standard & Poor’s 500 Index companies avoiding U.S. taxes is $2 trillion, according to Friel’s analysis. Companies including General Electric Co. lead the way with $110 billion in international earnings, along with Microsoft Corp. with $93 billion and Pfizer Inc. with $69 billion.
Obama’s plan to impose a fee on the liabilities of the nation’s largest banks, investment firms and insurers would apply to companies with $50 billion in assets, including JP Morgan, Citigroup Inc. and Bank of America Corp. It would raise $110 billion over a decade.
The proposal won’t succeed because banks would pass the costs on to consumers, Shelby said yesterday.
Representatives of JP Morgan, Citigroup and Goldman Sachs Group Inc. declined to comment about Obama’s plan.
Frank Keating, chief executive officer of the American Bankers Association, called the plan a “tax on bank borrowers — from individuals to businesses large and small.
“It is completely at odds to want more jobs while hurting banks that finance the business growth necessary to create them,” Keating said in an e-mailed statement.
–With assistance from Terry Atlas, Cheyenne Hopkins, Jonathan Allen and Angela Greiling Keane in Washington.