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Cyber security companies boosted by hack concerns

Cyber security companies boosted by hack concerns

Being the software security provider to the recently hacked NHS has not hurt Sophos (SOPH). Shares in the UK's biggest listed cyber security company rose 8 per cent on Monday, as investors speculated - with good reason - that the group's services are likely to be in greater demand after the high-profile cyber ransom attack.

The malware attack targeted a vulnerability in Microsoft's (US:MSFT) Windows XP software and spread to computers in 150 countries, including the online systems of 47 NHS trusts in England.

Microsoft blamed the US National Security Agency (NSA), from which crucial information regarding flaws in various global software systems was stolen in April. The software giant criticised the NSA for storing information about software weaknesses - including that of Windows XP - which allowed the hackers to infiltrate unprotected systems.

While the market for cyber security is increasingly competitive, continued rising demand could justify these share price rises”

Microsoft itself has come under fire for not providing regular security updates for older versions of its software. That said, in March the US tech giant released a Windows security update for the vulnerability targeted in this hack, but many users were yet to run it.

Meanwhile, in the UK, Chris Hopson, chief executive of trade association NHS Providers, pointed to an imbalance between the financial demands of the NHS and the funds available. "We are robbing the NHS infrastructure budget to support day-to-day running costs," he told BBC Breakfast. Indeed, Sophos has a software package specifically designed to protect against ransomware, but it is only available at an additional fee. However, Ian Mann, chief executive of small-cap cyber security specialist ECSC (ECSC), said the attack was "very easily preventable", had the free security updates recommended by Microsoft been run.

ECSC - which joined London's Alternative Investment Market (Aim) in December last year - saw its share price rise nearly a third during the week following the attack, amid speculation that fresh cyber crime concerns would drive more customers to its services. Although Mr Mann thinks it's too early to tell whether long-term sales will have benefited, the group's emergency response service was in high demand during the confusion on Friday. Even NCC (NCC), which has recently struggled to get its cyber security division in shape, has enjoyed strong share price momentum this week. According to Sophos chief executive Kris Hagerman customer numbers have risen steadily over the past few years as more organisations realise the importance of good cyber security. High-profile hacks, like that on the NHS, "spike the flow" of that increase, he said.

IC VIEW:

While the market for cyber security is increasingly competitive, continued rising demand could justify these share price rises. Next year will see the arrival of new legislation where companies will face greater fines for a security breach. High-profile incidents are likely to further fuel rising demand.

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By Megan Boxall,
18 May 2017

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