F5 is facing serious consequences from its own security incident. On Monday, the company warned investors that a recent, deep breach of its systems would hurt demand and provided annual revenue forecasts below Wall Street expectations. The market reacted immediately, with the company’s shares down 5.8 per cent in after-hours trading.
At the heart of the problem is an incident disclosed earlier this month in which hackers gained ‘long-term, persistent access’ to F5’s systems. Most worryingly, this access included source code for one of the company’s key security services. As Reuters reported, citing sources close to the investigation, Chinese-backed hackers may be behind the attack.
The scale of the breach has caused alarm at the highest levels. Officials in the US and UK warned that federal networks were among the targets of attackers in the wake of the hack, calling for immediate action.
Now F5 admits that this image crisis will translate into finances. The company officially anticipates “short-term disruptions to sales cycles” as its customers – mainly users of the BIG-IP platform – put their purchasing decisions on hold, focusing on risk assessment and urgent upgrades.
The numbers don’t lie. F5 forecast full-year revenue growth in the range of just 0% to 4%, while analysts (according to LSEG) were expecting growth of 4.8%. Similarly, the forecast for the first quarter (USD 730-780 million) was below the market consensus (USD 791 million).
Interestingly, during a conference call with investors, F5’s management stated that it has yet to see a real impact on demand. However, cautious financial projections suggest that the company expects the shockwave to come in the first half of the year. For a cyber security provider whose reputation is a key currency, regaining customer trust after its own stumble will now be its biggest challenge.
