This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Target Security Breach in Context

NEW YORK (TheStreet) -- So what happened at Target  (TGT), and how much trouble are we in?

Target shares came under pressure after the company announced a security breach that exposed up to 40 million card numbers to thieves between Thanksgiving and last Sunday.

The stolen data included customer names, card numbers, expiration dates and the Card Verification Value (CVV), a three-or-four digit code often used to verify a card's legitimacy.

These data are sometimes called "track data" within the industry. They are encoded in the magnetic stripe on the back of the card. The CVV acts as a "checksum" on the other numbers, allowing encrypted data to be read.

These data are supposed to be scrubbed from systems as soon as a transaction is processed, according to rules set by large processors such as Visa  (V), rules that are updated regularly.

Because this leak did not affect the company's Web store, the hackers probably broke into a data line running from the stores to Target, from someone collecting transactions for Target to Target, or from Target to its own card processors.

This is the biggest retail card breach since TJX Companies (TJX) lost an estimated $256 million after 45 million accounts were compromised in late 2006 through insecure WiFi and insecure storage of data. 

TJX stock weathered the 2007 breach well, something investors selling Target today might want to consider. The shares are up more than threefold since the breach was reported, and that includes a sharp fall during the Great Recession.

Shares in other companies suffering breaches, including processors Heartland Payment Systems  (HPY) and Global Payments  (GPN), have also recovered from where they were when those incidents happened. Heartland recently hit an all-time high. 

Since card processing has been going on for decades, many of the systems being used are based on IBM  (IBM) mainframes. Some use custom programming and languages such as Cobol that younger programmers may not know. The whole field is complicated, specialized and focused on meeting regulations that constantly raise the security bar.

Another way to improve security is through so-called "chip and PIN" cards, which include a data-filled chip rather than a simple magnetic stripe. They are now being rolled out through cards often used for European travel, including the American Express  (AXP) Platinum card. 

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs