Why Tech Stocks Are Shocked by Intelligence Leaks

Why Tech Stocks Are Shocked by Intelligence Leaks

Stock prices of tech giants Apple, Samsung and Microsoft remained unchanged after Wikileaks’ dump this month, which contained documents that described a hack by the CIA on smart devices – from phones to televisions. These leaks could have an affect on the market. 

This is just the latest round of hostilities in the modern antagonism between governments, which aim to keep us safe from terrorists and other boogeymen, and tech companies, which argue that the government itself is the boogeymen that should be of most concern to its consumers. 


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Several American companies sit at the heart of this issue, raising the national stake of historical questions on the role privacy should play in securing citizens not only from direct threats, but also from an ever-expanding federal bureaucracy hungry for more data.

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The hyper-surveillance themes of the fictional book “1984” by English author George Orwell seem to have a tighter grip on American minds that on those now dwelling in the writer’s homeland. The government of Oceania, which rules over land known as Great Britain in the dystopian novel, pedaled concepts of “thoughtcrime,” which made independent thinking taboo, and, most memorably, Big Brother, who led the Inner Party and reveled in his cult of personality.


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Cameras installed by the government and its paranoid ministries followed citizens from home to street to work to home again, spreading an aura of fear in the imagined societies and the pages of the book assigned as required reading for millions of American high-schoolers.

Today, cameras have proliferated via smart phones, computers and other devices in a program funded by citizens, instead of spying regimes – and it could be just as effective at alerting governments regarding internal or external threats, if it wasn’t for those pesky encryption features…


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Still, spy agencies from both sides of the Atlantic have done their part to co-develop devices that report back sensitive intel in a clandestine manner.

One of the key revelations of the 8,761-page Wikileak talked of a “fake-off” mode for a Samsung wireless internet-enabled television set that was developed with the support of the British M15 spy agency. The stealth feature lets the TV to remain on – even when the owner instructs it to turn off – enabling the device to capture sensitive conversations and send the recording to the CIA.

“Protecting consumers’ privacy and the security of our devices is a top priority at Samsung. We are aware of the report in question and are urgently looking into the matter,” a Samsung spokesperson told CNBC by email after news of the reports hit the press.

When faced with unyielding Apple devices, the CIA had identified 14 “zero-day exploits” – a codename for software vulnerabilities that the Cupertino-based tech major had yet to identify and fix. This information made its rounds among international intelligence agencies, including the National Security Agency (NSA) and the U.K.-based GCHQ.

“Apple is deeply committed to safeguarding our customers’ privacy and security…and we’re constantly working to keep it that way,” according to an official spokesperson. “While our initial analysis indicates that many of the issues leaked were already patched in the latest iOS, we will continue work to rapidly address any identified vulnerabilities. We always urge customers to download the latest iOS to make sure they have the most recent security updates.”

The accumulation of anti-iProduct hacks likely occurred when the heated public battle between Apple and the FBI simmered down in early 2016. Authorities announced that they had gained access to the coveted information on San Bernardino shooter Syed Farook’s iPhone with the help of a third-party hacker who showed them how to bypass the auto-erase feature on iOS that wipes the device after a certain amount of failed passcode entries.

Before the FBI found their anonymous ally, however, Apple refused to bend to the government agency’s will, citing concerns that handing over code that would unravel iOS’ built-in privacy protection mechanisms could jeopardize the security of millions of iPhone users around the world. The government could be hacked, exposing the code to sinister groups who could open a Pandora’s box of cybercrimes – mass identity thefts, private surveillance via hacking and more.

Apple CEO Tim Cook declined to provide “reasonable technical assistance” to the FBI, as ordered by a federal judge, and called the order a “chilling” result, especially after ex-NSA technologist Edward Snowden’s exposé on the extent of his former employer’s spy activities and capabilities. Still, authorities insisted it was a one-off request, prompting a court battle.

The U.S. Department of Justice asked for the case to be dropped after the handy helper hacker – reported to be Israeli firm Cellebrite, but without official confirmation – assisted the FBI in their problem.

“From the beginning, we objected to the FBI’s demand that Apple build a backdoor into the iPhone because we believed it was wrong and would set a dangerous precedent. As a result of the government’s dismissal, neither of these occurred,” Apple said after the case was officially dropped.

The lack of market reaction to the recent spills on intelligence agency encroachments makes sense in light of AAPL’s performance through the company’s late-2015, early-2016 headline battle with the U.S. federal government. As CNN Money reported at the time, the stock, which represents the world’s most valuable company, began its descent in April of 2015 – several months before the San Bernardino shooting even occurred in December. The news site attributed the 10 percent fall in the stock’s value during the beginning of 2016 to lackluster sales after the release of the iPhone 6s and 6s Plus due to limited technical enhancements over its predecessor.

Paul La Monica adressed the Apple-FBI affairs’ limited market effect in a succinct series of questions:

“If you think Apple should hand over the keys to Farook’s iPhone 5c to the FBI, will you really boycott Apple, as Donald Trump has suggested?

What then? Do you buy an Android phone? With an operating system from Google — whose CEO has publicly supported Cook?”

Speaking of Google, the CIA also wielded 24 “weaponized” exploits for the Android operating system, but Alphabet has yet to respond to the information in the leaks.

The agency used their operating system hacks to compromise popular third-party chat applications such as Whatsapp and Signal to capture voice messages and text messages before they went through the boilerplate encryption process.

Signal’s parent company, Open Whisper Systems, and the leaders of other related tech enterprises wrote last week that the CIA’s hacks aimed to insert malware, rather than jeopardize the app’s encryption technology.

“The exploitation of user endpoints (mobile phones, personal computers, etc) is actually not a new technique, but one that has existed since the first malware was created,” explained Andy Yen, the co-founder of the encrypted mail service ProtonMail in a blog post. “This unfortunately is not something that cryptography is designed to defend against, as encryption by itself cannot guarantee the security of end-user devices.”

In the tech sphere, the privacy vs. security battle pits some of the biggest players in the private sector against its public overlords – both of whom claim to represent the masses, which they both serve in separate arenas.

Collateral damage from the face-offs does not interfere with market trends because the democratic system of “voting with your dollar” embedded in capitalism does not provide a purchase option for consumers who believe the government should be given a “master key” to peer into private citizens’ devices. And that demographic isn’t sizeable in the United States to begin with.


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