Little-known SolarWinds gets scrutiny over hack, stock sales

A man sits at a computer and types on a keyboard. (Photo by Nicolas Armer/picture alliance via Getty Images)

Before this week, few people were aware of SolarWinds, a Texas-based software company providing vital computer network monitoring services to corporations and government agencies around the world.

But the revelation that elite cyber spies have spent months secretly exploiting SolarWinds' software to peer into computer networks has put many of its highest-profile customers in national governments and Fortune 500 companies on high alert. And it's raising questions about how soon company insiders knew of its security vulnerabilities as its biggest investors sold off stock.

Founded in 1999 by two brothers in Tulsa, Oklahoma, ahead of the feared turn-of-the-millennium Y2K computer bug, the company’s website says its first product “arrived on the scene to help IT pros quell everyone’s world-ending fears.”

This time, its products are the ones instilling fears. The company on Sunday began alerting about 33,000 of its customers that an “outside nation state” — widely suspected to be Russia — had found a back door into some updated versions of its premier product, Orion. The ubiquitous software tool, which helps organizations monitor the performance of their computer networks and servers, had become an instrument for spies to steal information undetected.

“They’re not a household name the same way that Microsoft is. That’s because their software sits in the back office," said Rob Oliver, a research analyst at Baird who has followed the company for years. “Workers could have spent their whole career without hearing about SolarWinds. But I guarantee your IT department will know about it.”

Now plenty of other people know about it, too. One of SolarWinds’ customers, the prominent California cybersecurity firm FireEye, was the first to discover the cyberespionage operation. FireEye revealed earlier this month that its own systems were breached by attackers who made off with its defensive hacking tools. Among the other revealed spying targets were the U.S. departments of Treasury and Commerce.

The Department of Homeland Security’s cybersecurity unit this week directed all federal agencies to remove the compromised software and thousands of companies were expected to do the same.

Among the business sectors scrambling to protect their systems and assess potential theft of information were the electric power industry, defense contractors and telecommunications firms.

The breach has caused a crisis for SolarWinds, which is now based in the hilly outskirts of Austin, Texas. The compromised product accounts for nearly half the company’s annual revenue, which totaled $753.9 million over the first nine months of this year. Its stock has plummeted 23% since the beginning of the week.

Moody’s Investors Service said Wednesday it was looking to downgrade its rating for the company, citing the “potential for reputational damage, material loss of customers, a slowdown in business performance and high remediation and legal costs.”

SolarWinds’ longtime CEO, Kevin Thompson, had months earlier indicated that he would be leaving at the end of the year as the company explored spinning off one of its divisions. The SolarWinds board appointed his replacement, current PulseSecure CEO Sudhakar Ramakrishna, on Dec. 7, according to a financial filing, a day before FireEye first publicly revealed the hack on its own system and two days before the change of CEOs was announced.

It was also on Dec. 7 that the company’s two biggest investors, Silver Lake and Thoma Bravo, which control a majority stake in the publicly traded company, sold more than $280 million in stock to a Canadian public pension fund. The two private equity firms in a joint statement said they “were not aware of this potential cyberattack” at the time they sold the stock. It was six days later when SolarWinds disclosed the breach.

The hacking operation began at least as early as March when SolarWinds customers who installed updates to their Orion software were unknowingly welcoming hidden malicious code that could give intruders the same view of their corporate network that in-house IT crews have. FireEye described the malware’s dizzying capabilities — from initially lying dormant up to two weeks, to hiding in plain sight by masquerading its reconnaissance forays as Orion activity.

FireEye said Wednesday that it had identified a “killswitch” that prevents the malware used by the hackers from operating. But while that disables the original backdoor, it won't remove intruders from systems where they created different ways of remotely accessing victimized networks.

SolarWinds executives declined interviews through a spokesperson, who cited an ongoing investigation into the hacking operation that involves the FBI and other agencies.

“This is an unimaginable, unfortunate situation," Oliver said. “SolarWinds products have always been reliable. Its value proposition has been around reliability.”

Thompson's last few weeks at the helm are likely to be spent responding to frightened customers, some of whom are also rankled about marketing tactics that might have made a target of SolarWinds and its highest-profile clients.

The company earlier this week took down a web page that boasted of dozens of its best-known customers, from the White House, Pentagon and the Secret Service to the McDonald’s restaurant chain and Smithsonian museums.

The Associated Press is among SolarWinds' reported hundreds of thousands of customers, though the news agency said it did not use the compromised Orion products. SolarWinds estimated in a financial filing that about 18,000 customers had installed the compromised software, meaning many of them were vulnerable to spy operations at some time this year.

FireEye, without naming any specific targets, has said it has confirmed infections in North America, Europe, Asia and the Middle East to governments, consulting firms and the health care, technology, telecommunications and oil and gas industries — and has been informing affected organizations around the world.


AP Technology writer Frank Bajak in Boston contributed to this report.