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7/28/2011
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RSA SecurID Breach Cost $66 Million

EMC details second quarter 2011 cost to replace tokens, monitor customers, and handle fallout from RSA's SecurID breach.

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Between April and June 2011, EMC spent $66 million dealing with the fallout from a March cyber attack against its systems, which resulted in the compromise of information relating to the SecurID two-factor authentication sold by EMC's security division, RSA.

That clean-up figure was disclosed last week during an EMC earnings call, by David Goulden, the company's chief financial officer. It doesn't include post-breach expenses from the first quarter, when EMC began investigating the attack, hardening its systems, and working with customers to prevent their being exploited as a result of the attacks.

In spite of the breach, EMC reported strong second-quarter financial results, earning consolidated revenue of $4.85 billion, which is an increase of 20% compared with the same period one year ago. Meanwhile, second-quarter GAAP net income increased by 28% from the same period last year, to reach $546 million. The company saw large growth in its information infrastructure and virtual infrastructure products and services, including quarterly revenue increases of 19% for its information storage group.

Those results led executives to increase their financial outlook for 2011 and predict consolidated revenue in excess of $19.8 billion, which would be a 16% increase from EMC's 2010 revenues of $17 billion.

Growth was slower for RSA, however, which saw year-on-year revenue growth increase slightly, from 8% to 13%, fueled by the company's identity management, protection, and security management compliance businesses. "It is likely that RSA growth will remain a bit slower as remediation efforts continue," said Goulden. But he said that "overall customer feedback is positive and increasingly, customers are showing confidence."

As that suggests, RSA faced criticism after the breach for failing to disclose details of what had been stolen, or how it might be used against its customers. RSA's approach changed somewhat, however, after attackers used stolen SecurID information to launch attacks against numerous defense contractors, including Lockheed Martin.

Facing increasing criticism from customers and commentators after those attacks, RSA chairman Art Coviello in early June issued an open letter providing additional details about the breach and RSA's approach to handling it. He also announced that RSA would offer replacement tokens to more customers. But despite the additional details, Coviello stopped short of explaining exactly what attackers had stolen and how that might effect customers.

According to Goulden, RSA ultimately offered replacement tokens to the one-third of its customers who use SecurID to protect intellectual property and corporate networks. For the other two-thirds of customers, who largely use the tokens to protect "Web-based consumer financial transactions," the company offered additional security monitoring. That strategy was decided by EMC after determining that attackers didn't appear to be seeking consumers' financial details. Rather, he said, "our analysis of the attack led us to believe that likely targets were the defense sector and related government agencies."

On the earnings call, Goulden also defended RSA's post-breach approach, saying the shift in strategy hadn't been related to a change in the actual risk facing customers. "What did change was our customer's sensitivity to risk. This was caused by the same news flow around cyber attacks as in addition to press coverage of the attack on Lockheed Martin, there was broad media coverage of attacks on organizations including Google, Sony, Epsilon, the Australian government and PBS," he said. "While these attacks were entirely unrelated to RSA, the publicity resulted in many customers risk tolerance going down while the level of awareness and concern went up."

In this new Tech Center report, we profile five database breaches--and extract the lessons to be learned from each. Plus: A rundown of six technologies to reduce your risk. Download it here (registration required).

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