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Ransomware attack sparks surge in demand for specialist shares
Thursday 18 May 2017 Author: Steven Frazer

Organisations across the world have been thrown into disarray by a ransomware hacking attack that has hobbled IT systems. That’s prompted investors to take another look at firms which help defend against cyber security breaches.

Experts are calling it the biggest ransomware attack so far, with more than 200,000 computers believed to have been infected from Russia to Taiwan. The event shut down IT systems that manage parts of the NHS, German railways, Nissan and scores of other organisations across the globe.

The significant news resulted in investors flocking to cyber-related stocks at the start of the week. FTSE 250 networks and security services specialist Sophos (SOPH) rallied nearly 8% to 367.1p when stock market trading began on 15 May, adding nearly £120m to its market value.

We’ve consistently backed the business for success since it joined the stock market in July 2015 at 225p per share, and it remains one of our top pick in the security sector.

Manchester-based IT security consultancy NCC (NCC) saw its share price rally by more than 3% to 142.25p on 15 May, while much larger gains were chalked-up by AIM cyber companies.

Shares in consultancy and managed services minnow ECSC (ECSC:AIM) soared almost 26% to 497.5p. That pushed the company’s market capitalisation to nearly £45m, three-times its £15m valuation at its IPO (initial public offering) on 14 December 2016.

Distributed denial of service (DDoS) specialist Corero Network Security (CNS:AIM) increased by nearly 13% to 8.75p on the same day.

DDoS attacks are similar to ransomware infections in that they are both forms of shutting down targeted websites and IT systems, normally for cash, although not exclusively.

Corero has developed its own SmartWall platform which it sells to internet service providers among others.


Ransomware epidemic

Ransom attacks can be highly lucrative business for online criminals. Financial gain is believed to be the primary motive behind the majority of attacks on enterprise systems. These accounted for 41% of cyber-attacks in 2016, claims data from security firm Radware, up from 25% in 2015.

Most attacks are instigated through spam and phishing emails, which encourage the unwary to click on links under false pretences, opening the cyber backdoor for criminals.

‘According to IDC, global spending related to cybersecurity services, software and hardware reached $74bn in 2016,’ says investment bank Societe Generale. ‘IDC expects spending to reach $100bn by 2020. That would represent an average annual growth rate of 8.3%, twice the expected growth in overall IT spending.’ (SF)

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