CrowdStrike chaos could prompt rethink among investors, customers

Nevin Al Sukari - Sana'a - Passengers wait at Milwaukee Mitchell International Airport after airlines grounded flights due to a worldwide tech outage caused by an update to CrowdStrike's "Falcon Sensor" software.— Reuters pic

LONDON, July 19 — American cybersecurity company CrowdStrike became a household name for all the wrong reasons yesterday after a botched software update caused havoc around the world.

The company’s stock fell more than 11% on Friday after an outage disrupted operations across multiple industries — shutting down public services, halting flights and forcing some broadcasters off the air.

CrowdStrike — which previously reached a market cap of about $83 billion — is among the most popular cybersecurity providers in the world, with close to 30,000 subscribers globally. The firm has been a software darling for investors, due to its growth and high margin. Its stock had doubled in the past year before Friday’s slump.

But the outage could force customers and investors alike to rethink their dependence on the company, opening the door to potential rivals like Palo Alto Networks, which saw its stock rise 1.7 per cent yesterday, and SentinelOne, which jumped as much as 3.6 per cent.

”This event is a reminder of how complex and intertwined our global computing systems are and how vulnerable they are to a mistake and an error,” said Gil Luria, senior software analyst at D.A. Davidson.

”While most companies don’t really have an alternative to Microsoft, they do have alternatives for security,” he added.

”This may cause many companies to reconsider which security product they use, and whether they need to diversify across different security products in order to prevent these types of outages.”

Outages happens

Security officials at various companies expressed dissatisfaction with CrowdStrike but did not disclose plans to stop working with the vendor, according to a person privy to the conversations.

Analysts said that while Friday’s events were damaging for CrowdStrike, they did not foresee competitors taking much market share as a result of the incident.

”This is clearly a major black eye for CrowdStrike and the stock will be under pressure,” said Dan Ives, analyst at Wedbush Securities, but he noted that the incident stemmed from a technical update and not a hack or cybersecurity threat, which he said would be “more worrying”.

Analysts at JPMorgan said customers would initially be upset, but that the company had taken ownership of the issue.

CrowdStrike CEO George Kurtz said in a post on social media platform X that the event was not a security incident or cyberattack and a fix had been deployed. He later apologised for the impact caused by the company.

”Outages happen, and the scale here is meaningful, but we think diligent handholding and efficient response from CrowdStrike will be helpful,” the JPMorgan analysts said.

Ben Bernstein, a former cybersecurity investor who now runs security startup Gusto, said he plans to stick with CrowdStrike for now.

”You typically want to go to the larger companies where they have supposedly better processes. It’s about specific companies and interactions that people have with these companies, and if they feel they’re trustworthy,” said Bernstein. — Reuters