Delta Air Lines on Thursday said it still plans to seek compensation from CrowdStrike Holdings over an IT outage in July. CrowdStrike stock has gained 16% in 2024, rebounding somewhat from a big sell-off after the IT outage, caused by a faulty software update.
On the stock market today, CrowdStrike stock fell a fraction to 295.57. Delta reported third quarter earnings before the market open.
Further, in Q3, Delta took a one-time 45-cent hit to earnings tied to the IT outage. Also, Delta claims it suffered a $380 million revenue hit.
Delta has threatened both CrowdStrike and Microsoft with lawsuits.
"The havoc that was created deserves, in my opinion, to be fully compensated for," Delta Chief Executive Ed Bastian told CNBC. "This matter is now in the hands of our attorneys. We hope that we'll see a resolution but we keep all of our options open."
In August, Delta hired prominent attorney David Boies to seek damages from CrowdStrike and Microsoft. Delta canceled more than 5,000 mainline flights over several days, far more than rivals.
Microsoft 'Kernel' Involved In IT Outage
CrowdStrike's software update required access to Microsoft's operating system. The heart of the Microsoft Windows software is known as the "kernel."
Amid the IT outage, Microsoft and CrowdStrike continue to have close ties.
Microsoft Chief Executive Satya Nadella took part in a CrowdStrike customer conference in early September. Over the next two years, Microsoft plans changes to the Windows kernel system. But, Microsoft will still grant CrowdStrike and other cybersecurity firms access to the kernel software layer.
TD Cowen analyst Shaul Eyal in a recent report noted that if Microsoft restricted access to the kernel layer, it could face U.S. government antitrust action. That's because Microsoft sells cybersecurity products itself and could have a competitive advantage from restricting access.
A 2009 European Union decision required Microsoft to allow third-party vendors access to its software kernel.
CrowdStrike Stock Competition
At a private Windows Endpoint Security Ecosystem summit in Redmond, Wash., on Sept. 10, Microsoft also updated its plans to make software changes, analysts said.
Further, CrowdStrike competes with Palo Alto Networks, SentinelOneand others in the "endpoint" market. Endpoint security tools detect malware on laptops, mobile phones and other devices that access corporate networks.
Also, CrowdStrike is building a broad, threat-detection cybersecurity platform called XDR, or extended detection and response. It monitors endpoints as well as web/email gateways, web application firewalls and cloud business workloads. Zscaler is also among CrowdStrike rivals.
CrowdStrike Stock Up 56% Before IT Outage
On July 9, CrowdStrike was up 56% in 2024, its high before the IT outage.
Amid the IT outage, analysts expect lower growth for "net new" annual recurring revenue (ARR) because of delays in signing contracts and expectations that many customers will seek price discounts when renewing contracts to help cover the cost of business disruptions.
CrowdStrike's negotiations with customers over pricing concessions are expected to play out through 2025 and perhaps beyond.
Bank of America, in a report in August, said: "While the incident was not related to the quality issues of CrowdStrike's solution, it did flag a material potential weakness in the company's quality assurance procedures."
The Committee on Homeland Security's Cybersecurity and Infrastructure Protection Subcommittee held a hearing on Sept. 24 probing the IT outage.
Also, CrowdStrike has told analysts that its liability for Delta and other customers is contractually capped at an amount in the "single-digit millions."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
