This morning, we publish the first installment of an extraordinary 12,000 word story by Fortune’s Peter Elkind about the now famous cyber attack against Sony Corp. We recommend you read it. It is a chillingly compelling, behind-the-scenes narrative of the events leading up to the attack. Were it not about them, the folks at Sony Pictures might make it into a movie.
More importantly, the story, based on six months of in-depth reporting, contains important lessons that every company needs to learn – and many still haven’t. Cyber security is one of the critical challenges of our era. Attacks in the past year against Sony, Anthem, J.P. Morgan, Target, Home Depot and most recently, the government’s Office of Personnel Management, should have made it abundantly clear that this is an existential threat to business, and it isn’t going away.
It’s also a critical challenge for foreign policy. In the nuclear era, we have avoided conflagration because of a strategy of deterrence – nations know if they use nuclear weapons, retaliation will be swift and certain. But in the cyber era, we have no such strategy. The U.S. government may be convinced North Korea is behind the Sony attack and China is behind the OPM attack – but what price has either country paid?
The full Sony story appears in the July issue of Fortune, on newsstands next week. In the meantime, you can read the first installment here, and my editor’s note here. We’ll publish part two online Friday, and the rest Saturday.
An update from yesterday. I wrote that Jim McNerney’s pay package of $29 million last year exceeded Jeff Immelt’s of $18.8 million. But a new analysis out this morning by the Wall Street Journal and the Hay Group puts Immelt’s 2014 total pay at $37.3 million, reflecting a change in the value of his deferred compensation and pension — thus exceeding McNerney’s by more than $8 million. This is a tough game to score.
Enjoy the day. And mind your cyber hygiene.
• HBO’s Facebook premiere
In a sign of the changing times of content distribution, television network HBO has announced plans to premiere episodes of two new comedy series on Facebook. The popularity of web videos have led to U.S. networks to tinker with new platforms to attract new viewers. And Facebook is a behemoth outlet with more than 1.4 billion monthly active users. Fortune
• How much best performing CEOs got paid
The Wall Street Journal’s annual pay survey found that all 10 of the CEOs that posted the best shareholder returns were paid more than they got a year earlier, while all but two of the 10 worst performers got pay cuts. Two of the best paid CEOs — Viacom’s Philippe Dauman and General Electric’s Jeff Immelt — got higher compensation even though the value of their shareholders’ investments in the company declined. WSJ (subscription required)
• Icahn reaps massive Netflix gain
Activist investor Carl Icahn, who first bought Netflix shares at the end of 2012 at a cost of roughly $58 apiece, has said he sold his remaining 1.4 million shares in the company — reaping $874 million gain in the sale. Icahn isn’t exactly planning to take that cash to the bank, as the investor said he is now thinking Apple’s stock represents “the same opportunity we stated NFLX (Netflix stock) offered several years ago.” USA Today
• Why Spotify bought a data science startup
Spotify has acquired a small data analytics startup, scooping up a small firm that previously crunched data for main rival Beats Music, which Apple bought last year for $3 billion. The startup, called Seed Scientific, will presumably help Spotify improves its song recommendations for listeners and help generate more targeted ads. Fortune
• Greek worries weigh on stocks
On Wednesday, investors’ fears over the future of Greece’s economy caused a falloff in U.S. stock prices and today, concerns about that nation’s talks with creditors dented stock markets abroad. European stocks were hurt on Thursday by the lack of progress in negotiations on a cash-for-reform deal for Athens pushing investors towards safe-haven German Bunds. The talks appeared to stumble on Wednesday. Reuters
Around the Water Cooler
• Martha Stewart’s payday
Domestic diva Martha Stewart is selling her media empire for a relatively small deal worth $353 million (far less than what the company was worth at its dot-com level peak). But that doesn’t mean Stewart herself isn’t getting highly compensated. Under terms of a newly released employment agreement, Stewart is getting paid a base salary of $500,000 a year, with additional perks including a bonus and up to $100,000 in annual expenses. Fortune
• Candy industry tackles melting problem
Who knew the candy industry was busy putting money into research to ensure chocolate melts in the mouth, not in the hands. Apparently, the world’s leading maker of bulk chocolate, Barry Callebaut, is busy on that sort of project, while many customers like Nestle and Hershey have developed similar efforts. What’s at stake? Billions in potential profits in countries with warmer climates. Bloomberg
• Google to convert old coal plant
Internet search giant Google is planning to build its first new U.S. data center in eight years at an aging coal plant in rural Alabama, a facility that will cost $600 million to build. Somewhat counterintuitively, the data center will be powered by clean energy, though Google wouldn’t give detail about where the clean energy could come from. Fortune
5 things to know today
Nike earnings and, for a change, Greece — 5 things to know today. Today’s story can be found here.