In the last few weeks, emotions have run high when it comes to the Cyber Intelligence Sharing and Protection Act, or CISPA. The stated aim of CISPA "is to help the U.S government investigate cyber threats and ensure the security of networks against a cyber-attack." That said, many proponents of the bill have fears it will go beyond its reach and implement a policing of big data vs. the rights users have with regard to their own privacy and their social network postings.
Companies such as Facebook (FB), Microsoft (MSFT), Verizon (VZ) and AT&T (T) all support the bill. One tech behemoth that has abstained from taking a stance is Google (GOOG), whose users regularly update their geo-targeted positions as well as statuses through Google+. Google should, however, oppose the bill for one simple reason: The trust that it implies to its users should never be compromised, and if it continues to abstain or support such a bill, Google could essentially implode. When it comes to the privacy of user data, investors should clearly worry and maybe even rethink their positions in some of the companies I've mentioned.
Facebook: If CISPA passes the in the U.S. Senate, the face of social networking is going to change, and not for the better. A majority of net income for Facebook comes from ad revenue, and most users would agree the ads on Facebook can be very liberal and misleading at times. That said, a mass exodus of users could be on the horizon, and that doesn't bode well for the company as it plans to go public on May 17th. Investors should note that Facebook plans on going public at a share price of $28-$35 a share, even though its most recent quarterly report showed a second consecutive decline in revenues.
Microsoft: Microsoft understands the importance of its users' privacy and in recent days shifted from its once mild approval of the bill to a discomfort with regard to the bill's reach. The company has begun to raise questions about the bill's scope, legal reach, and application of previous privacy policies it has had in place for years. Investors should welcome the move and consider Microsoft's position on the bill a positive one. Those looking to obtain a position in Microsoft should do so in a manner that's pretty conservative at first, and then as we get to closer and closer to earnings either increase or decrease moderately.
AT&T and Verizon: Mobile carriers AT&T and Verizon have showed support for CISPA, and it should be noted that the position both companies have taken is one of awareness. In other words, if AT&T or Verizon happen to be the recipient of a cyber attack, they will have the ability to share information not only with one another, but with the proper law enforcement authorities. From an investing standpoint, AT&T's and Verizon's position makes sense. The protection of user information is key, especially among both companies' wireless units given that that data is exposed to various application platforms and other social networks. Investors shouldn't be too worried about the bill with regard to AT&T and Verizon, and continue to acquire positions in both companies as their P/E ratios and yields are both very attractive at current levels.
Google: It would be in Google's best interest to take a stance against CISPA. Why? Google users strongly believe that everything they say or do is protected and stored securely in the cloud-based platform they are using. Google stresses that user data would only be used for advertising purposes, and in an effort to strengthen the implied trust the company has with its users, a stance against CISPA is necessary. From an investing standpoint, Google is currently operating on some very delicate ground and for the experienced investor, an options play may be the way to go. I'd acquire puts in the company, both December 2012 440 puts (currently trading at $5.30) and January 2014 320 puts (currently trading at $6.30). Those are great bets if CISPA passes the Senate. Investors should be aware that if CISPA fails, all bets are off.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
