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5 Companies That Had A Rough Week

For the week ending Aug. 2, CRN looks at IT companies that were unfortunate, unsuccessful or just didn't make good decisions.

The Week Of August 2

Topping this week's roundup of those having a rough week is Capital One, which disclosed a hack involving the accessing of personal information from 106 million credit card holders and applicants in the U.S. and Canada.

The incident included the compromise of 1 million Canadian Social Insurance numbers and 140,000 U.S. Social Security numbers.

Also making the "Rough Week" list are FireEye and NetApp, which each lowered their latest quarterly outlook; Apple, which could end up seeing lower U.S. iPhone demand if newly proposed China tariffs take effect; and Oracle, which received harsh words from the Department of Defense over the company’s challenge to the JEDI procurement process.

Not everyone in the IT industry was having a rough go of it this week. For a rundown of companies that made smart decisions, executed savvy strategic moves – or just had good luck – check out this week's Five Companies That Came To Win roundup.

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Capital One Breach Exposed Data From 106 Million Credit Card Owners, Applicants

Financial services giant Capital One revealed this week that a hacker gained access to personal information from 106 million credit card holders and applicants in the U.S. and Canada.

Roughly 100 million individuals in the United States and six million individuals in Canada were affected by the security breach, according to Capital One. Consumers and small businesses that applied for a Capital One credit card between 2005 and early 2019 had their name, address, ZIP code/postal code, phone number, email address, date of birth, and self-reported income accessed by the hacker, according to the company.

One million Canadian Social Insurance numbers, 140,000 U.S. Social Security numbers and 80,000 linked bank account numbers of Capital One customers were also compromised.

Capital One chairman and CEO Richard Fairbank apologized to customers for the incident. The company expects to spend between $100 million and $150 million on customer notifications, credit monitoring, technology costs and legal support associated with the breach – just in 2019.

On Monday, the FBI arrested Paige Thompson, a 33-year-old former Seattle technology company software engineer, on charges of computer fraud and abuse in connection with the incident. Thompson allegedly posted on GitHub about her theft of information from the servers storing the Capital One data. Someone spotted the post, alerted Capital One on July 17, which in turn alerted the FBI on July 19. In addition to arresting and charging Thompson on Monday, the FBI seized electronic storage devices at her residence containing the data.

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FireEye Discloses Reduced Outlook

Platform security vendor FireEye on Tuesday disclosed an outlook for its third-quarter financial results that is below Wall Street forecasts.

For the third quarter, ended Sept. 30, FireEye now projects non-GAAP net income ranging from breaking even to 2 cents per diluted share, with revenue of between $217 million and $221 million. Those projections are below previously reported Wall Street analyst estimates of 7 cents per diluted share in net income and $228.4 million in revenue for the third quarter.

FireEye's stock price dropped 14.3 percent, to $13.80 a share, in after-hours trading Tuesday—the lowest FireEye's stock has traded since November 2017.

On Tuesday, Milpitas, Calif.-based FireEye said it has adopted a new structure that will bring its Mandiant professional services, threat intelligence, managed defense and Helix and Verodin platforms together into a single organization.

"I believe this new alignment will accelerate our execution toward the platform, and unite the portions of our business that are accelerating in their growth," FireEye CEO Kevin Mandia said Tuesday during the company's earnings call.

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Apple Takes A ‘Potential Gut Punch’ From Trump’s China Tariff Threat

While Apple earlier this week reported strong momentum in its Mac and iPad product lines along with improving conditions in its iPhone business, the Cupertino, Calif.-based company received some unwelcome news later in the week—as President Donald Trump on Thursday threatened more tariffs for products manufactured in China.

Trump said that an additional 10 percent tariff on $300 billion worth of Chinese imports will take effect on Sept. 1. Final assembly of nearly all Apple products is carried out in China.

“While many US companies are impacted by this latest trade tension, the ‘poster child’ for the US/China UFC trade battle continues to be Apple in the eyes of the Street,” wrote Daniel Ives, managing director for equity research at Wedbush Securities, in a note to investors.

Apple did not immediately respond to a request for comment.

“If Apple passes through the 10% tariff to consumers we could see a hit to iPhone demand by roughly 6 million to 8 million iPhones in the US,” Ives wrote. “The jury is still out on how this high stakes poker game plays out over the coming months although today the tariff news out of left field is a clear gut punch to Cupertino and throws a mini wrench in the iPhone demand story which will weigh on shares.”

Apple’s stock price fell 2.5 percent on Thursday, closing at $208.43. Shares were down another 2.9 percent, to $202.30, as of mid-morning Friday.

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DOD Rejects Oracle's JEDI Cloud Allegations

A military spokesperson had harsh words for Oracle on Sunday in reaction to the final decision from the judge who already rejected the tech giant's challenge to the JEDI procurement process for the military's cloud computing transformation project.

Oracle's allegations of conflicts of interest in Joint Enterprise Defense Infrastructure bidding are "the subject of poorly-informed and often manipulative speculation," said Elissa Smith, a Department of Defense spokeswoman.

"DOD officials directly involved in the work of this procurement along with the senior leaders charged with making the critical decisions related to JEDI have always placed the interests of the warfighter first and have acted without bias, prejudice, or self-interest," Smith said. "The same cannot be said of all parties to the debate over JEDI."

The full decision from Judge Eric Bruggink squarely rejected Oracle's claim that the integrity of the procurement process had been compromised, while acknowledging problems with the actions of certain military officials with ties to Amazon Web Services and difficult, sometimes conflicting legal requirements around the decision to source the potentially $10 billion contract through a single cloud provider.

Oracle, based in Redwood City, Calif., had filed a lawsuit Dec. 6 against the federal government related to the Department of Defense’s lucrative Joint Enterprise Defense Infrastructure (JEDI) initiative.

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NetApp Lowers Its Outlook

NetApp shares on Thursday took a solid hit after the Sunnyvale, Calif.-based company said revenue and earnings ended up below expectations for its fiscal 2020 first quarter, ended July 26.

The hybrid cloud data services and data management company's stock price fell nearly 18 percent to the $48-range in after-hours trading Thursday.

NetApp said it now expects fiscal Q1 revenue of between $1.22 billion and $1.23 billion, which represents a decline of approximately 17 percent from the first quarter of fiscal year 2019. NetApp had previously guided net revenue of $1.32 billion to $1.47 billion.

After accounting for $90 million in enterprise software license agreements from the first fiscal quarter of 2019 that did not repeat in the first quarter of 2020, revenue would have fallen 12 percent.

Net income on a GAAP basis is now expected to be in the range of 30 cents to 35 cents per share, compared to the 56 cents to 64 cents per share the company previously expected.

For full fiscal year 2020, NetApp now expects revenue to be 5 percent to 10 percent below previous expectations. The company is slated to unveil its actual first fiscal quarter 2020 results on Aug. 14.

While NetApp is disappointed its preliminary quarterly results are lower than had previously anticipated, the company remains confident in its long-term strategy, said NetApp CEO George Kurian in a statement.

"Our customer conversations indicate that our hybrid multicloud portfolio of solutions is the right one. We believe we can return to growth over time by prudently reallocating investments to expand sales coverage and accelerate our participation in the growing private cloud and cloud data services markets," Kurian said in the statement.

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