Hornbuckle: Paying ransom to MGM’s cyber hackers was never considered
MGM Resorts International CEO Bill Hornbuckle said Tuesday the casino operator was the victim of “corporate terrorism at its finest” but the company never considered paying ransom to the hackers who engineered the September cyberattack that cost the casino operator $100 million in cash flow.
During the opening keynote session at the Global Gaming Expo in Las Vegas, Hornbuckle said MGM’s operations on the Strip and in eight states following the attack “were completely in the dark” and were not functioning for “four or five days.”
In remarks that were far more off-the-cuff than what was included in the company’s filing with the Securities and Exchange Commission last week, Hornbuckle said the attack took down the hotel and casino systems, much of that done voluntarily by the company in order to lessen the loss of customer data to the attackers.
Paying ransom was never a consideration. Hornbuckle said the company “was already in defense mode after playing Whac-A-Mole on the first day.” He added that the hackers never found their way into the company’s core systems.
“We reacted quickly to protect data,” Hornbuckle said during the 20-minute talk with CNBC reporter Contessa Brewer at the Venetian Expo, adding that even if the company had decided to pay off the hackers, it was still going to take time to assess the totality of the damages and how to get the company back online.
“So you saw us shutting down systems by our own design,” he said. “The criminals literally understood what was happening and shut the balance of it down for us.”
Hornbuckle said the attack tested the company’s resolve. Many of the immediate workaround solutions involved having employees perform job duties with pen and paper as they once did before automation took over.
“It was an interesting cultural moment for the company to come together,” he said. “I think you saw we rebounded quickly.”
Gaming analysts commended MGM’s decisions in research reports last week after the company’s SEC filing and ahead of Hornbuckle’s remarks at G2E.
Several said the financial hit could be forgotten if next month’s Formula One Las Vegas Grand Prix holds the promise of a financial windfall the company has predicted.
“We think the $100 million in losses from disruptions was in-line to slightly higher than expectation,” Macquarie Securities gaming analyst Chad Beynon told investors in a research note. “The impact on the fourth quarter should be lower, judging by [MGM’s] positive occupancy forecasts.”
The larger challenge, Beynon hinted, was winning back customers who had their personal information stolen in a cyberattack. MGM said it did not believe customer passwords, bank account numbers or payment card information were affected.
“Overall we think MGM came out okay, but will lose some [market] share to [other casino operators,” Beynon said.
Deutsche Bank gaming analyst Carlo Santarelli told investors in a research note that roughly 80 percent of the loss in cash flow was in Las Vegas with the rest of the losses in other markets.
MGM said it expects its cybersecurity insurance to cover the losses.
“Broadly, we believe the financial clarity around this issue, as well as the reaffirmation of a limited impact to the fourth quarter trends, will serve as a positive for [the price of MGM shares], which are down roughly 19 percent since the news of the cyber breach broke,” Santarelli wrote.
Hornbuckle told the G2E audience the average daily room rates at MGM’s high-end Strip resorts are 400 percent higher than a year ago for the Nov. 16-18 Formula One Las Vegas Grand Prix. He said credit being extended to high-end customers is larger than credit offered during the 2015 Floyd Mayweather Jr. vs. Manny Pacquiao fight at the MGM Grand Garden.
During the company’s third-quarter conference call in August, he predicted a potentially record revenue month in November from business drawn to the Strip by the race.
CBRE Equity Research analyst John DeCree told investors MGM has increased its levels of promotional spending to compensate customers for the inconvenience related to issues such as hotel check-in and cash-out delays while systems were down.
DeCree predicted it could take up to six months for MGM to be reimbursed by its insurance carriers. He said the hits the company might take the rest of the year could be viewed as “one-time in nature.”
“Given the strong occupancy in October and favorable outlook for November, we still expect no long-term impact on the business.”
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