By Martin Coulter
LONDON (Reuters) – U.S. cybersecurity firm CrowdStrike (NASDAQ:CROWDSTRIKE) became a household name for all the wrong reasons on Friday after a botched update caused havoc around the world.
The company's shares fell more than 14% after an outage disrupted operations across multiple industries, shutting down utilities, halting flights and forcing some broadcasters off the air.
CrowdStrike, which had already reached a market capitalization of about $83 billion, is one of the world's most popular cybersecurity providers, with about 30,000 subscribers worldwide. The company has been a favorite of investors in the software sector, due to its growth and high margins. Its shares had doubled in the past year before Friday's drop.
But the disruption could force customers and investors to rethink their dependence on the company, opening the door to potential rivals such as Palo Alto Networks (NASDAQ:), whose shares rose 1.7% on Friday, and Sentinel One, which rose as much as 3.6%.
“This event is a reminder of how complex and interconnected our global computing systems are and how vulnerable they are to errors and mistakes,” said Gil Luria, senior software analyst at DA Davidson.
“While most companies don't really have an alternative to Microsoft (NASDAQ:), they do have alternatives when it comes to security,” he added.
“This may cause many companies to reconsider what security product they use and whether they need to diversify across different security products to avoid these types of disruptions.”
INTERRUPTIONS OCCUR
However, other analysts said that while Friday's events had been damaging to CrowdStrike, they did not expect competitors to take much market share as a result of the incident.
“This is clearly a big blow to CrowdStrike and the stock will be under pressure,” said Dan Ives, an analyst at Wedbush Securities, but noted that the incident was due to a technical update and not a hack or cybersecurity threat, which he said would be “more worrying.”
JPMorgan analysts said customers would initially be upset but the company had taken responsibility for the matter.
CrowdStrike CEO George Kurtz said in a post on social media platform x that the incident was not a security incident or cyberattack and that a fix had been implemented. He later apologized for the impact caused by the company.
“Disruptions do happen and the scale in this case is significant, but we believe diligent assistance and an efficient response from CrowdStrike will be helpful,” the JPMorgan analysts said.
<img src="https://technicalterrence.com/wp-content/uploads/2024/07/Chaos-at-CrowdStrike-could-prompt-a-rethink-among-investors-and.jpg" title="© Reuters. Passengers wait in line at ticket counters after airlines cancelled flights due to a global technology glitch caused by an update to the “Sensor Falcon” de CrowdStrike.” software=”” which=”” crashed=”” microsoft=”” windows=”” systems=”” at=”” tampa=”” international=”” airport=”” in=”” florida=”” u.s.=”” july=”” reuters=”” octavio=”” jones=”” alt=”© Reuters. Passengers wait in line at ticket counters after airlines cancelled flights due to a global technology glitch caused by an update to the “Sensor Falcon” de CrowdStrike.” rel=”external-image”/>
Governments and utilities in countries including New Zealand, Australia and several US states were also affected by the outage, which could lead lawmakers to push for laws to protect against a similar problem in the future.
“Governments are likely to investigate how this happened and what they can do in terms of regulation to prevent it from happening again,” said DA Davidson's Luria.
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