Microsoft 's hacking disclosure could be a challenge for its $20 billion-a-year cybersecurity franchise but bullish news for fellow portfolio name and rival Palo Alto Networks. A Russian intelligence group, known as Nobelium, targeted the email accounts of Microsoft employees, including top executives, starting in November 2023. Microsoft said the attack hasn't had a material impact on operations, but the company is investigating further to mitigate any future risks. Microsoft told Wall Street about the breach in a securities filing late Friday. MSFT 1Y mountain Microsoft 1 year “The attack was not the result of a vulnerability in Microsoft products or services,” the tech giant said in a blog post . “To date, there is no evidence that the threat actor had any access to customer environments, production systems, source code, or AI systems.” Nobelium was the same group that breached government supplier SolarWinds in 2020, which caused all kinds of fallout. Back then, Microsoft was hacked in connection with the attack . While hacks and breaches are bitter pills, Jim Cramer said Monday that Microsoft shares will only be “tainted for a few days until [people] forget about it.” Jim, however, acknowledged that the optics for Microsoft's growing cybersecurity business were not good. Microsoft stock was trading modestly lower Monday but has climbed more than 5% since the start of 2024 following last year's 56% gains. Microsoft's cybersecurity incident doesn't leave us any less bullish on the mega-cap name. The firm has strong growth prospects from its leadership in generative artificial intelligence and its Azure cloud, which more than offset negative headlines. While its cybersecurity business pulls in about $20 billion in annual sales, Microsoft's revenue jumped 7% in 2023 to nearly $212 billion. PANW 1Y mountain Palo Alto Networks 1 year But bad news for Microsoft could be good news for Palo Alto Networks — our go-to cybersecurity stock, which just keeps hitting record high after record high. It's firmly above a $100 billion market value. That's a big deal compared to its peers but small compared to the likes of a Microsoft or an Apple whose market caps are near $3 trillion. In a Sunday note to clients, JPMorgan said the breach “could drive greater levels of caution with regard to relying too heavily on Microsoft for security.” The analysts said that cybersecurity software vendors that “compete with Microsoft in their core markets will benefit,” including Palo Alto Networks. “[Microsoft] has been recognized for improving the effectiveness of its security platform and has been benefiting from consolidation as more customers look to control costs and reduce the number of vendors they need to manage,” the analysts explained. “However, customers still need to balance cost with risk and we could see this latest breach generate concerns from customers and partners regarding risk associated with Microsoft's own security posture, the effectiveness of its own security technology, and the scale of attacks the company needs to manage as a highly-targeted platform.” During Monday's Morning Meeting, Jim echoed the Street's sentiments. “Palo Alto's been sensational,” he said. “This stock's clearly not done” running higher. After more than doubling in 2023, Palo Alto has been off to the races again in 2024. Shares have surged roughly 17% since the start of the year. The Securities and Exchange Commission's (SEC) new disclosure rules around cybersecurity attacks could be another catalyst for Palo Alto, Jim added. Corporations are required to share more information with investors about cybersecurity breaches and what's being done to address them. Increased cyber spending in the sector — and subsequent demand for Palo Alto's offerings — could occur as companies take an even more cautious approach to protect their data and systems. During a CNBC interview at the recent World Economic Forum's annual meeting in Davos, Switzerland, CEO Nikesh Arora said Palo Alto Networks stands to benefit from helping companies securely adopt artificial intelligence and combat the growing threat from emboldened hackers. Last year saw breaches of the who's who of big, publicly-traded companies from Club name Estee Lauder to Clorox to identity management company Okta to MGM Resorts and Caesars Entertainment . (Jim Cramer's Charitable Trust is long MSFT, PANW, AAPL, EL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Microsoft CEO Satya Nadella speaks during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.Justin Sullivan | Getty Images
Microsoft's hacking disclosure could be a challenge for its $20 billion-a-year cybersecurity franchise but bullish news for fellow portfolio name and rival Palo Alto Networks.
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