Shares in the British software company Sage Group (SGE) posted a sharp loss on Monday after the company reported a data breach that may have compromised personal details for employees at 280 UK businesses.
Sage, the global supplier of accounting and business management software, saw its share price drop 2.3% to 708p in early morning trade on Monday after the news was revealed.
On Friday Sage contacted their business customers to inform them that their information may have been affected by a data breach, which included bank account details and salary information.
Police are investigating the data breach and the Information Commissioner’s Office, an independent body that is responsible for the enforcement of the Data Protection Act 1998, is also assisting.
UK Firms Data Security Issues at Risk
This is not the first major data breach by a UK firm. In October last year, TalkTalk (TALK), the UK telecoms company, suffered a cyber-attack that put their four million customers’ financial data at risk. The company’s share price has dropped 24% since the data leak scandal in October last year.
British Gas, the UK energy firm, also reported a data breach the following week; its customers email addresses and account passwords were posted online in an unexplained data leak.
Marks & Spencer (MKS) also announced a data leak soon afterwards; The UK retailer had to suspend its website for two hours after customers were able to see other people’s details when they logged in to their accounts.
Two thirds of large UK businesses have been hit by cyber-attacks or suffered data breaches in the past year, a UK government research into cyber security showed in May 2016. The research also said most common attacks detected involved viruses, spyware or malware that could have been prevented using the Government’s Cyber Essentials scheme. Previous data leaks and government research raised concerns among UK’s businesses to better protect themselves from cyber criminals.
Morningstar Equity Analyst Andrew Lange said the industry shift to cloud-based products has created future revenue risks for Sage.
“We think Sage is likely to face greater competition in international markets going forward. For example, close competitor Intuit has launched QuickBooks Online and is expanding aggressively outside the U.S. without the need for a local salesforce, unlike Sage,” he said.
“The company generates around 58% of its revenue in Europe, which exposes Sage to significant economic uncertainty as the EU continues to suffer from the effects of the global recession.”
Key to Sage’s future success will be how the firm is able to attract customers to these new global platforms, Lange added, which will help to support the firm’s goal of shifting its user base to more subscription-based products and services. Yet facing the data leak scandal it might place the company into a difficult position to attract customers.
Sage has more than six million customers worldwide, employs 13,500 people, and generates more than £1.4 billion in revenue. The company develops, distributes and supports business management software and related products. It serves medium-sized and smaller businesses in the areas of accounting, enterprise resource planning, payroll, and accountancy related software.
