Major technical outages occurred worldwide when problems with a CrowdStrike (CRWD) software update disrupted airlines, banking institutions and healthcare systems. Global problems arose after CrowdStrike updated software in Microsoft Windows (MSFT) systems.
Citizens JMP Securities analyst Trevor Walsh joins Market Domination to provide insight into the CrowdStrike incident and what it means for the company and those in the cybersecurity industry going forward.
Walsh maintains that this incident will not have a significant impact on CrowdStrike’s overall health ahead of its next earnings release on September 4, suggesting that the incident is a one-time event rather than a broader risk to the cybersecurity company.
“The criticality of CrowdStrike as a security platform, I think, outweighs some of those issues in the sense that customers can’t afford to just shut them down and not renew because of one incident. They’re just too tied into the ecosystem,” Walsh tells Yahoo Finance. “They’re too critical of one tool and what kind of tool within the overall stack. So I think those conversations certainly have the potential to happen…”
For more expert insights and the latest market activity, click here to watch the full episode of Market Domination.
This post was written by Nicholas Jacobino
Video transcript
Meanwhile, we see the masses’ stocks going on strike. They’re down about 12% today due to the outages. We’re now diving deeper into what this disruption means for the company and others in the cybersecurity space. We’re joined by citizens of Trevor Walsh.
J MP Security Equity Research Analyst Trevor, thank you very much for joining us.
Well, this is not good news for these types of companies to say the least.
And where are they going now?
How do they handle this?
Is this a short-term problem or will it also be an issue in the long term?
Yes, thank you Julie.
Uh, good question.
Um, I mean, I think in this in-between period, as you said, it’s certainly not something that the company wants to happen.
But I do want to emphasize that, as far as disruptions caused by cyber tools go, this may not be an unusual occurrence on a smaller scale in my previous life in the industry.
We’ve seen this happen quite often, especially with endpoint security tools due to the nature of their access to operating systems.
Um, you do everything you can to mitigate the risks around testing before you launch something and put it into production and so on.
But clearly there have been some setbacks and mistakes made on this side.
So III I would like to commend the company, and Mr. Kurtz, who shows all day long how transparent they are and how they solve the problem themselves and how they want to work with customers in the future.
So I think there’s definitely some damage to the brand’s reputation.
But I think the company is doing everything honestly and as best they can to help customers through the situation. Trevor, that’s interesting.
I saw a couple of your colleagues on the street who also had this name and said, “The timing of all this is not that great, given the masses.”
They said Trevor, the point is that it’s happening in the last two weeks of the quarter, which they stress is very important for the company and could limit the upside in the second quarter.
I’m curious to hear your thoughts on this topic as a financial analyst.
Yeah, I think it’s definitely something to consider. Time is everything with these things. And when you’re in that two-week crunch, there’s less time for them at the moment.
Um, that’s when you’re trying to bring in all those systems, those POs and things like that.
And uh, when these kinds of issues arise, it can, you know, even if it’s the customer, it can’t be that he’s misbehaving or trying to cheat you on the price, which can definitely delay a deal.
Again, I think Crowdstrike is a critical security platform.
And I think that outweighs some of those issues, in the sense that customers can’t afford to just turn them off and not renew because of an incident. They’re just too tied into the ecosystem, they’re too critical of a tool or any kind of tool within the overall stack.
So I think these kinds of conversations certainly have the potential to happen.
But uh, I can see that the company is doing what it needs to do to turn customers into customers.
Right.
Would there be a little noise around the corner?
Absolute.
But I think, again, I think it’s more of a one-time basis than a broad, broad-based risk.
And at the same time, Trevor, about how the market is reacting.
Well, Crowdstrike is down, but some competitors are up.
I mean, we’re seeing a surge in Palo Alto Networks stock, we’re seeing a surge in Sentinel One stock, for example. Do you think some competitors could take advantage of that and take some of the stock?
I don’t think there will be any significant market share movements at this point.
Could there be anecdotal wins over the past few years, the coming weeks, and into the next quarter?
Yeah, because I think there are a number of customers who are evaluating new endpoint solutions to kind of create a new network and have the masses and the center fall side by side, for example, and maybe this helps to make that decision less favorable and skew the masses in their favor.
Um, but I think Sentinel benefits from that a little bit more than Palo Alto, given the size and scope of those two companies and one or two big wins for Sentinel.
One thing means a lot more than, you know, a single, maybe smaller deal that Palo Alto took from Trout Strike.
Um, but I think your former guest, Ms. Johnson, set the tone pretty well, in terms of how companies in general are responding to this incident. It’s more of a team that’s putting all hands on deck.
Let’s get the critical infrastructure, the key companies within Crowdstrike and Microsoft, up and running again.
Um, I think companies that would use this as an angle, in a very aggressive way, would think twice about that. Because I think they are the, the, the shoot, they could be in the same boat.
Uh, you know, later Trevor had a question for you.
You’ve seen this trend of vendor consolidation at Cyber, Trevor.
And I wonder if there will be more attention for that trend in the future?
Maybe some people think Trevor thinks it’s better if we have more players instead of less.
Yes.
And I think that’s right, Josh, in the sense that people are looking at that priority or that strategy.
Anyway, I think there is a platform strategy and trend from vendors like Crowdstrike and Palo Alto.
But then there’s also the general perception of companies and users, who don’t necessarily want to consolidate one mega mega monolithic tool into their environment, because that creates a single point of failure.
I think you have to make a little distinction between the marketing terms of the vendors and the actual users themselves.
And to be sure, given the current macroeconomic environment and budgets.
There is certainly opportunity for consolidation of tools, but I don’t think we live in a world where Microsoft, Crowdstrike Palo Alto, becomes the only security tool for these large enterprises. I don’t see things changing that quickly.
Trevor.
Thank you.
Useful perspective on this whole situation.
Appreciate it.
Thank you.