- Cyber attack to cost company approximately $50-$70 million in Q2
- Q2 operating margins to be the lowest for the year
- Expects incremental costs with lockdown exits
- The company says ransomware attack encrypted its internal systems, effectively disabling them
The recent Maze ransomware attack on tech major Cognizant Technology Solutions hurt the company’s revenues and corresponding margins by $50-$70 million . Brian Humphries, the CEO, said over an investor call that the company responded immediately to the crisis by mobilising the entire leadership team and drawing on the expertise of IT and security teams, also bringing in leading cybersecurity experts to investigate and respond to the attack. The company has also reported the attack to the appropriate law enforcement agencies. “We proactively provided clients with Indicators of Compromise or so called IOC, namely forensic data that a company can use to identify potentially malicious activity and defend against attacks from external actors,” said Brian.
The company said the ransomware attack encrypted some of the company’s internal systems, effectively disabling them. The company proactively took the other systems offline. As a result of the ransomware attack, some of the company’s clients opted to suspend the access to Cognizant’s networks.
“With the ransomware attack now contend, we’ve restored VDI in automated laptop provisioning. Further, with previously ordered equipment now physically in India and distribution constraints less respective per the latest state directives, we’re now substantially work-from-home enabled,” said Brian. While the company expects a majority of revenue and margin impact from the ransomware attack to be reflected in the coming quarter, the ongoing remediation costs could spread beyond Q2.
Apart from Covid-19, Cognizant expects ransomware attack to negatively impact the company’s performance for the year. Karen McLoughlin, CFO, said: “We anticipate that our Q2 adjusted operating margin will be the lowest quarter of the year, given the combined impact of COVID-19 and the ransomware attack”. The company which in early April withdrew the earlier full year revenue guidance of 2-4% growth said that in near term there could be other covid-related costs which it will continue to identify separately. “It is likely that there will be incremental costs in the near term as we prepare to exit the lockdown periods,” said Brian .
Cognizant posted a revenue growth of $4.2 billion dollars for first quarter, up 3.5 percent in constant currency terms. The company’s digital revenue share, as a percentage of total revenue stood at approximately 41 percent for the quarter, a 19 percent YoY growth.