In a blog posting late Tuesday afternoon, Google said the attacks originated in China and attempted to break into email accounts of human rights activists. Hacking into the corporate systems might also have allowed access to sensitive documents and intellectual property. However, Adobe issued a statement today saying that was not the case, "We have no evidence to indicate that any sensitive information has been compromised."
Google's response to the intrusion that it might leave the China market prompted praise from human rights groups and from House Speaker Nancy Pelosi, D-San Francisco, who has been critical of China's record on human rights. Google said it will work with China to end censorship of its Chinese search engine, google.cn, as requested by the Chinese government.
At risk is an estimated $200 million to $300 million in revenue Google current earns in annual online ad sales. That estimate comes from several analysts, including Barron's West Coast editor Eric Savitz in Palo Alto. Savitz points out that China search engine advertising generates about $1 billion in yearly revenue with baidu.cn the dominant player with over 70 percent of the market. He says leaving the China market could have a short-term impact on Google's earnings.
If Google pulls out of China, the door may close permanently. "China has a long memory," said Santa Clara University law professor Anna Han, who has been advising companies on doing business in China for 25 years. And Google has now challenged China in a very public way.
Han says China has a long history of cases in which intellectual property, such as trademarks and products, has been stolen. She cited recent cases that were won in Chinese courts by U.S. firms Starbucks and pharmaceutical giant Pfizer. Without knowing yet what may have been stolen, Prof. Han believes other companies will be reluctant to join Google in taking on China out of fear of losing the opportunity to do business in a country with 1.3 billion potential customers.
The sophistication of the attack is at the highest level, according to George Kurtz, worldwide chief technology officer at Santa Clara based Internet security firm McAfee. Kurtz said corporations maintain strong firewalls to protect their computer systems from intrusion. However, the weakest link can be employees who download software with malicious code that opens the door to cyber thieves. He says individuals with Gmail or other hosted e-mail services need to be vigilant about using and updating antivirus software.
Google Wednesday turned down an interview request. Its blog posting from Tuesday in which the breach was disclosed has not been updated.