5 Companies That Had A Rough Week

For the week ending Jan. 17, CRN looks at IT companies that were unfortunate, unsuccessful or just didn't make good decisions.

The Week Ending Jan. 17

Topping this week's roundup of those having a rough week is Microsoft, which continues to face opposition to the award of the massive Pentagon JEDI cloud computing contract.

Also making the list are the Albany Airport for a ransomware attack (and payment of a five-figure ransom), Zscaler for having to pony up millions to settle a patent lawsuit, and employees at both CyrusOne and Mozilla for facing layoffs.

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.

Microsoft Facing Increased Legal Opposition From AWS In JEDI Award

Microsoft might have to wait a bit before it can get started on that $10 billion JEDI cloud computing contract for the Pentagon.

Amazon Web Services this week said it will seek a court ruling to prevent any substantive work orders from being issued under the JEDI contract while AWS appeals the U.S. Department of Defense’s decision in October to award the contract to rival Microsoft.

AWS intends to file a motion with the U.S. Court of Federal Claims seeking a temporary restraining order and/or a preliminary injunction on Jan. 24 to prevent the issuance of “substantive task orders” under the contract while pursuing its appeal. The Pentagon had earlier signaled its intention to begin issuing the orders on Feb. 11.

AWS has argued that the contract was awarded under a flawed selection process tainted by alleged politically motivated interference from the White House and President Donald Trump.

Albany Airport Hit With Malware Attack, Pays Five-Figure Ransom

The Albany Airport and Schenectady-based MSP LogicalNet were dealing this week with the aftermath of a ransomware attack during the holidays that resulted in the airport paying a five-figure ransom to regain access to its data.

A server in LogicalNet’s management services network was compromised early Christmas morning with the Sodinokibi Ransomware. From there the virus spread to the MSP’s clients, including the Albany County Airport Authority’s servers and backup servers.

The ransomware encrypted administrative files such as budget spreadsheets, but the attack did not affect operations at Albany International Airport – which the authority oversees – or at any airlines or the Transportation Security Administration (TSA).

The airport authority paid a ransom of “under six figures” in Bitcoin on Dec. 30 to unlock its data. While other LogicalNet clients were reported to have been hit by the ransomware and locked out of their systems, most were able to recover using backup systems. (While the airport authority had a backup system, it reportedly shared a drive with the main system, making both vulnerable to the attack. The age and configuration of the IT equipment was also a factor.)

The authority is seeking to recover from LogicalNet the $25,000 deductible it had to pay on its insurance policy.

Zscaler To Pay $15 Million To Settle Symantec Patent Lawsuits

Web and network security tech developer Zscaler has agreed to cough up $15 million to settle patent infringement lawsuits brought against the company by Symantec, charging Zscaler with violating a number of Symantec patents.

Symantec filed a lawsuit in December 2016, shortly after it acquired Blue Coat Systems, charging Zscaler with infringing seven Symantec patents in areas such as web security, data loss prevention, threat prevention, access control and antivirus. A second lawsuit in 2017 alleged an additional seven patent infringements in web security, security scanning, data loss prevention, intrusion prevention and intrusion signature analysis.

Late last year Broadcom bought the Symantec Enterprise Security business. This week, to settle the litigation, Broadcom agreed to provide Zscaler with a patent license, release and covenant not to sue in exchange for the $15 million payment.

The settlement is equal to just under 5 percent of Zscaler’s $303 million annual sales in its most recent fiscal year. Zscaler chairman and CEO Jay Chaudhry said that while the company was confident of its position in the case, the settlement was in the best long-term interest of the company and its stockholders.

CyrusOne Lays Off 12% Of Workforce As Data Center Demands Softens

It was a tough week for data center service provider CyrusOne and dozens of its now-former employees who were laid off as the company faces a slowdown in demand from its largest hyperscale customers.

This week Dallas-based CyrusOne said it was cutting its workforce by 12 percent – 55 employees – as demand for data center services from hyperscale vendors such as Amazon, Apple, Google, Facebook and Microsoft appears to have softened. Those companies are collectively spending billions every quarter to build and equip new data centers around the world.

CyrusOne said the layoffs would result in annual savings of $10 million. The company’s stock dropped 6 percent Tuesday following news of the cutbacks.

New Product Delays, Reduced Revenue Forecasts Lead To Layoffs At Mozilla

It was also a rough week for employees at Mozilla, which laid off about 70 employees on Wednesday when a slower-than-expected rollout of new products – expected to generate more revenue in 2019 and 2020 – just hasn’t happened.

Mozilla, developer of the popular web browser, generates most of its revenue through search partnerships. The company has been working on a number of new subscription products, including the Firefox Private Network and a device-level VPN service, according to a TechCrunch story.

Mozilla chairwoman and interim CEO Mitchell Baker, in a memo obtained by TechCrunch, said the slow rollout of those products, combined with less-than-expected revenue from non-search products, led to the layoffs.

“You may recall that we expected to be earning revenue in 2019 and 2020 from new subscription products as well as higher revenue from sources outside of search. This did not happen,” Baker said in the memo. “Our 2019 plan underestimated how long it would take to build and ship new, revenue-generating products. Given that, and all we learned in 2019 about the pace of innovation, we decided to take a more conservative approach to projecting our revenue for 2020. We also agreed to a principle of living within our means, of not spending more than we earn for the foreseeable future.”

The number of layoffs could increase slightly as Mozilla is still working to determine how many layoffs to make in the U.K. and France in compliance with employment laws in those countries.