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CrowdStrike shares tumbled 13% on Monday after the cybersecurity software company faced widespread issues stemming from a defective update to its Falcon vulnerability-protection software. The update, issued early on Friday, caused a significant disruption, impacting millions of Microsoft Windows devices, including PCs, computer servers, and display screens. The outage led to a variety of issues, including grounded flights and canceled medical appointments.
The incident affected 8.5 million Windows devices, representing less than 1% of the global total, according to Microsoft. In response, IT teams swiftly worked to rectify the issues, while malicious actors attempted to exploit the situation by creating fraudulent websites that appeared to offer legitimate software updates. CrowdStrike CEO George Kurtz discussed the incident with CNBC’s Jim Cramer, addressing the company’s efforts to resolve the problem.
The company’s stock had already dropped 11% on Friday, and over the weekend, images circulated on social media showing the “blue screen of death” on affected devices, highlighting the severity of the situation. CrowdStrike announced on Sunday that it was developing a solution to expedite the recovery process for the impacted systems.
On Sunday, Guggenheim Securities downgraded CrowdStrike’s stock from a buy to a neutral rating. Analysts, led by John DiFucci, cited the stock’s high valuation relative to recurring revenue and expressed concerns about potential delays in new contract signings due to the incident. They acknowledged the strength of CrowdStrike’s leadership team but advised investors to be cautious in the short term.
Conversely, Goldman Sachs maintained its buy rating for CrowdStrike shares in a note issued on Monday. However, the investment bank’s analysts, led by Gabriela Borges, anticipated that deal closures might slow down between the time of the outage and the end of CrowdStrike’s fiscal second quarter on July 31. They referenced a similar incident in 2010 involving McAfee, where a software glitch led to significant financial impacts, including deferred revenue and missed earnings. Interestingly, Kurtz was McAfee’s chief technology officer at the time.
In a regulatory filing on Monday, CrowdStrike stated, “This is an evolving situation. We continue to evaluate the impact of the event on our business and operations.” The company is working diligently to restore its systems and reassure its clients and investors as it navigates the fallout from this significant disruption.