Rackspace Technology faces a financial setback as it records $5 million in expenses for the first nine months of the year, stemming from a ransomware attack on its Hosted Exchange business in December 2022. The managed email solution, which represented about 1% of the company’s revenue, was discontinued after the attack, prompting the transition of many customers to Microsoft 365.
Furthermore, the expenses incurred include costs for remediation, investigation, legal and professional services, along with additional staff resources to address customer concerns.
While Rackspace anticipates receiving $5.4 million in loss-recovery insurance, the timing of reimbursement remains uncertain, posing a challenge as the company navigates the aftermath of the ransomware incident. The attack, attributed to the Play ransomware group, disrupted email access for 27 out of the company’s 30,000 Hosted Exchange customers, highlighting the extent of the breach.
As Rackspace grapples with ongoing legal battles related to the attack, currently in the early stages, the company emphasizes its vigorous defense against the lawsuits in court, expressing confidence that these legal challenges will not materially impact its financial position and operational results.
Despite the financial strain and pending lawsuits, Rackspace remains resilient in its commitment to managing the incident’s fallout. The company’s spokesperson, in line with regulatory filings, refrains from commenting extensively on litigation matters. This incident underscores the broader challenges and costs associated with cybersecurity breaches, emphasizing the importance of robust defense mechanisms and recovery strategies in the face of evolving cyber threats.