Cognizant expects $50-70 million revenue hit in Q2 due to ransomware attack

TE Raja Simhan Chennai | Updated on May 08, 2020 Published on May 08, 2020

Cognizant Technology Solutions anticipates revenue and margin impact to be in the range of $50-70 million for the second quarter ending June 30, 2020, due to a ransomware attack in April. Additionally, it will incur certain legal, consulting and other costs associated with the investigation, service restoration and remediation of the breach, the company’s CFO Karen McLoughlin told analysts while discussing the first-quarter (March quarter) financial results.

Cognizant’s CEO Brian Humphries said the ransomware attack, which occured before the company enabling work from home (WFH) due to the Covid-19 pandemic, will negatively impact the Q2 results for two reasons. First, the attack encrypted the company’s internal systems, effectively disabling them, and the company proactively took other systems offline. This disruption included both select systems supporting WFH enabling such as virtual desktop infrastructure (VDI) and the provisioning of laptops that have been expected to further increase the WFH capabilities in April.

Read: Cognizant Q1 net profit drops 17 per cent to $367 million

“Second, some clients opted to suspend our access to their networks. Billing was therefore impacted for a period of time, yet the cost of staffing these projects remained on the books,” Humphries said.

“We expect the vast majority of revenue and margin impact from the ransomware attack to be in the second quarter. However, ongoing remediation costs will ensue through subsequent quarters. We will disclose the financial impact to you on a quarterly basis to ensure appropriate visibility,” he said.

“Ransomware attacks are becoming all too frequent across industries. We are using this experience as an opportunity to refresh and strengthen our approach to security. We are already applying what we’ve learned to further harden and strengthen our security environments and we are further leveraging our external security experts to help inform and guide our long-term security strategy. Cybersecurity will continue to be a top priority for us in the years ahead,” he added.

Published on May 08, 2020

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