Ransomware attack will cost $50 - $70 million this quarter alone, Cognizant says

Attack, which came as firm was preparing for Covid measures, was a 'perfect storm' CEO says

The ransomware attack on US-based services provider Cognizant Technology Solutions in April is likely to cost the company between $50 million and $70 million this quarter, with additional expenses to come later in the year.

The attack using Maze ransomware occurred on April 17, encrypting files on Cognizant's internal systems and forcing the company to take a number of customer-facing services offline.

"As a result of this ransomware attack, our Q2 revenue and margins will both be negatively impacted," said CFO Karen Anne McLoughlin during a Q1 2020 earnings call, adding that the impact is likely to be "be in the range of $50 million to $70 million for the quarter", with additional legal, consulting and restoration costs to be met throughout the rest of the year.

"It is likely that costs related to the ransomware attack will continue to negatively impact our financial results beyond Q2," she said.

The attack came just as the company was taking measures to adapt to the Covid-19 restrictions, providing staff with VDI and extra laptops. In addition some customers chose to disconnect from the network, meaning that billing could not be carried out. CEO and director Brian Humphries, described it as a "perfect storm."

"Not only were we dealing with Covid, but then we had a ransomware attack that encrypted our servers, which actually took out some of the work-from-home capabilities that we had enabled in the prior weeks and also slowed our ability to enable further work-from-home because of some of the systems and tools we would have used to automate and provision laptops were no longer functioning," he said.

Automated laptop provisioning and VDI have now been restored and the company is in discussions with customers who had suspended access, said Humphries.

Revenue in Q1 grew 3.5 per cent year-over-year in constant currency to $4.2 billion, according to Cognizant, although the effects of both Covid-19 and the ransomware attack will inevitably have an impact during the rest of the year.

"Our revenues slowed meaningfully in March, reflecting the fulfilment challenges are shifting rapidly to a work-from-home environment across our delivery centres," said Humphries, adding that demand was also down through "cancellations of projects and discretionary spending and select requests for furloughs, rate concessions, and extended payment terms from our clients."