June 5 (Bloomberg) -- As the Flame virus wreaks havoc with Iranian computer systems, Israeli software companies say their country’s expertise with such cyber weapons has created a pool of army-trained hacking talent to hire from.
Billionaire Gil Shwed, who served in an elite intelligence unit, says he has recruited from the military for his Check Point Software Technologies Ltd., the world’s second-largest maker of security networks. Cyber-Ark Software Ltd., another specialist in cyber-defense that sold a stake to Goldman Sachs Group Inc. in December, finds top programmers in units that include the army’s nine-year program for exceptional math and science students, Chief Executive Officer Udi Mokady said.
Israel is among the leaders in a global growth industry as governments seek to defend financial systems, power plants and other public resources against cyber threats. The ingenuity of hackers, long regarded as pests bent on penetrating computers for mischief and profit, has become a critical resource with military and commercial payoffs, as Israeli companies seek a share of an $18 billion market.
Israel hasn’t said whether it created Flame. Vice Prime Minister Moshe Yaalon said it would be “reasonable” for anyone threatened by Iran to use cyber weapons.
Rated one of three countries best prepared to withstand digital attacks in a McAfee study, Israel is pouring resources into cyber warfare. Prime Minister Benjamin Netanyahu and Defense Minister Ehud Barak are scheduled to speak tomorrow at an international conference on cyber security at Tel Aviv University.
“This is an era that we’re entering into where entire societies can be paralyzed by cyber attack, and Israel is no different,” Netanyahu said on Feb. 19. “We are committed to being one of the three leading cyber powers of the world.”
Israeli companies are benefiting. Check Point’s shares, traded on the Nasdaq Stock Market, have jumped more than 70 percent in the past two years. Both its two main competitors, Cisco Systems Inc. and Juniper Networks Inc., have fallen about 30 percent in that period. Check Point rose 1.5 percent to $51.92 at the close today in New York.
“Today we have a lot more research on specific attacks, on methods used by hackers and a lot more understanding of the world of the hacker in order to build a better tool,” its founder Shwed, 45, said in an interview in Tel Aviv.
Check Point had a 10.7 percent share of the world cyber security market by revenue in 2009, according to a November 2010 study by market researcher IDC. Israeli companies earned about $4.2 billion from information technology products in 2010, with more than half of that coming from security, said Yafit Katz-Rubin, business development manager for the industry at the Israel Export Institute in Tel Aviv.
‘Need to Keep Up’
The Tel Aviv Stock Exchange and El Al Israel Airlines Ltd. were targets of cyber attacks in January, leaving their websites hobbled. Israeli security services are working with other governments to trace the source.
“We’re in pretty good shape with current threats, but the threats next year and two years from now are just going to get higher and we need to keep up,” said Yitzhak Ben Israel, who was chosen last year by Netanyahu to build Israel’s National Cyber Directorate, announced in May 2011 and allotted an undisclosed budget. “Our biggest worry is damage to our major life systems that are all controlled by computers.”
Israel’s expertise is drawing investors. Goldman joined Jerusalem Venture Partners in a $40 million investment in Cyber-Ark, which has its research and development facilities in Petach Tikva, Israel.
“The information security market is really going through a major disruption,” Cyber-Ark’s CEO Mokady said. “Organizations, governments had this ‘aha!’ moment in the last 18 months, where despite massive investment -- millions of dollars invested in security technologies -- the bad guys are coming in and, actually, they’re coming in very easily.”
Elbit Systems Ltd., Israel’s biggest non-government defense contractor, said today in a press release that it will sell a new cyber-security simulator, designed to train government, military and civilian infrastructure agencies in handling digital attacks.
Iran blamed Israel when its nuclear facilities were attacked by the Stuxnet worm last year and attributed Flame to what a spokesman called “illegitimate regimes,” a term it commonly uses for Israel. Iran’s Information Technology Organization said on its website that it has produced a tool to identify and remove Flame.
Israel, along with the U.S. and other allies, has said Iran may be seeking to build a nuclear weapon, and warned that it may bomb Iranian atomic development sites to halt the program. Iran says its nuclear work is for peaceful purposes.
Israel and the U.S. were partners in creating Stuxnet, the New York Times reported on June 1, citing participants in the program. President Barack Obama has since accelerated cyber attacks on Iran, the Times reported.
After Flame emerged, “most of the speculation has centered around Israel and I can understand why,” said Gabi Weimann, author of the book “Terror on the Internet,” who teaches at Haifa University. “Israelis are certainly in the top league of computer sciences especially in the field of computer warfare.”
Flame, discovered by Internet security companies on May 28, has the ability to steal documents, take desktop screenshots and spread through external drives.
“The complexity and functionality of the newly discovered malicious program exceed those of all cyber menaces known to date,” Russian-based Kaspersky Lab said in a statement on its website. It called Flame a “super-cyberweapon” and said it’s likely that a government is behind it. Founder Eugene Kaspersky will speak at tomorrow’s conference.
Erel Margalit, founder of JVP and chairman of Cyber-Ark, said the government needs to bolster ties between the military and technology companies to encourage more innovation in Internet security products.
“What we want to do is turn one of the world’s biggest problems into an Israeli economic opportunity,” Margalit said.
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