Wednesday, April 27, 2011

Sony shares fall 5 percent as Playstation woes threaten

A day after Sony revealed personal data had been stolen consumers are concerned about what may happen to their data next and angry with Sony for the slow release of information and the lack of details.

Angry Sony consumers criticized the company of not informing them their personal data had been stolen immediately after discovering the data breach on April 19. Sony shut down the PlayStation Network and Qriocity music services to investigate the breach and to prevent any future attacks, but did not provide any details about the cause or effects of the playstation Network outage or the data breach until April 26.

It’s already prompted at least one customer to bring a lawsuit against Sony. The first class action lawsuit on behalf of angry PlayStation Network members was filed by Kristopher Jones of Alabama on April 27 in the United States District Court for the North District of California. The lawsuit accuses Sony of breach of warranty, negligent data security and violations of consumers’ rights of privacy.

* Sony may face legal action due to Internet security breach

* Analyst estimates losses to top $1.5 bln

* Gamers threaten to leave Playstation network

* Stock falls 5 pct, biggest drop since mid-March

(Adds details, background)

Shares in Sony Corp fell 5 percent on Thursday as a massive leak of data on its Playstation games console users sparked global legal scrutiny and threatened to crimp its business.

In the United States, several members of Congress seized on the breach, in which hackers stole names, addresses and possibly credit card details from users of Sony's PlayStation Network, in one of the largest Internet security break-ins ever.

There is concern that loyal PlayStation gamers could ditch Sony in the wake of the data theft and analysts said the hacking could steer people looking to buy a video game console toward Microsoft Corp's Xbox, which has its own popular online network.

"I am outraged that my personal information may have been accessed by hackers," said Rich Chiang, a Playstation and Xbox user based in Shanghai.

"It is shocking that Sony has been so aggressive in going after people who have hacked their products and services, yet was this unprepared for the consequences of angering that community," said Chiang, an executive with a Chinese gaming firm.

"It is also disturbing that Sony took a full week after the breach to fully announce the details of the incident."

Sony's PlayStation Network, a service that produces an estimated $500 million in annual revenues, provides access to online games, movies and TV show.

By 0320 GMT (11:20 p.m. ET on Wednesday), Sony shares were down 4.8 percent in a broader market up 1.3 percent. The shares fell the most since mid-March.

Security experts said Sony needs to account for the loss of that business -- as well as damage to its brand -- when it tallies up the cost of dealing with the breach. Other costs include notifying customers of the attack and bringing in experts to cleanse its network.

Larry Ponemon, chairman and founder of the Ponemon Institute said the theft could cost Sony more than $1.5 billion, or an average of $20 for each of the 77 million customers whose data was potentially compromised. Poneman's firm specializes in securing information on computer networks.

Sony pulled the plug on the network on April 19 after finding out about the breach, but it did not tell the public about the hackers' attack until a week later.

The delay, which Sony said was needed to conduct a forensic investigation, may remind its overseas customers of the foot dragging by Toyota that earned the Japan's leading automaker the distain of consumers.

Sony shares have fallen more than 8 percent this week, with investors nervous about the fall out of the data leak episode.