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Sony’s Stringer Calls Hacker Attack ‘Hiccup’ in Company’s Online Strategy

Sony Corp. (6758) Chairman Howard Stringer said the hacker attack that crippled the company’s online entertainment services and exposed more than 100 million customer accounts was a hiccup in its Internet strategy.

“Nobody’s system is 100 percent secure,” Stringer, 69, said in a phone interview almost a month after the shutdown of the Qriocity and PlayStation Network services. “This is a hiccup in the road to a network future.”

The attack has undermined Stringer’s plan to lure customers by linking Sony’s televisions, mobile devices and computers to its entertainment content through the Internet. Stringer, who apologized for the breach earlier this month, said he doesn’t have estimates for how the hacking attack will affect earnings, scheduled for May 26.

“Investors are waiting to see more information on the financial impact,” said Yuji Fujimori, a Tokyo-based analyst at Barclays Plc. Sony “hasn’t been able to disclose much about the investigation.”

The shares fell 1.3 percent to 2,245 yen at the close of trading in Tokyo today. They have fallen 23 percent this year.

Sony hired three security firms to investigate the attack and is working with law enforcement officials after criticism it was too slow to inform consumers about the breach.

The effort to restore confidence suffered another blow yesterday when Sony temporarily shut down the password-reset pages on the website of PlayStation Network, which offers games and movies, and Qriocity, a service for programs and music.

Resetting Passwords

Users who forgot their old passwords would have been required to provide their e-mail address and date of birth. That information may have been stolen during the April breach, Sony has said.

“Consumers who haven’t reset their passwords for PSN are still encouraged to do so directly on their PS3,” spokesman Dan Race said in an e-mailed statement. The flaw has been fixed, and once the sites are back online, users will be able to resume resetting their passwords there, he said.

Japan’s biggest exporter of consumer electronics is increasing its reliance on the Internet to help spur demand for its products. Sony’s PlayStation Suite allows users to download games made by smaller developers on Google Inc.’s Android- powered smartphones.

In October, the maker of Bravia televisions started offering Internet-enabled TVs in the U.S. that use Google software to let viewers access websites and Web videos.

Photographer: Chris Goodney/Bloomberg

Sony Corp. Chairman and Chief Executive Officer Howard Stringer. Close

Sony Corp. Chairman and Chief Executive Officer Howard Stringer.

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Photographer: Chris Goodney/Bloomberg

Sony Corp. Chairman and Chief Executive Officer Howard Stringer.

Insurance Policy

The Tokyo-based maker of the PlayStation console is working to determine whether other computer systems were invaded, Stringer said. U.S. lawmakers have pressed Sony for more information about the hacker attack, the second-largest online data breach in U.S. history.

Authorities in the U.S., Europe and elsewhere haven’t provided Sony with details of criminal investigations into the attacks, Stringer said.

Stringer on May 5 offered U.S. users of Sony’s PlayStation Network and Qriocity services a year of free identity-theft protection, backed by a $1 million insurance policy per user covering legal and ID-restoration costs, as well as lost wages that occur after data is stolen.

The company yesterday also offered users a package of free games and movie services as compensation.

Representatives Mary Bono Mack, a California Republican, and G.K. Butterfield, a North Carolina Democrat, sent a letter to Sony requesting details on what customer information may have been stolen and whether the company’s investigation has determined how the breach occurred. The letter requests a response by May 25.

Three-Week Outage

Kazuo Hirai, Sony’s executive deputy president in charge of consumer products and network services, informed Stringer of the breach shortly before shutting down the online services.

“Kaz and I together worked out what we need to do,” Stringer said. Hirai and two other company officials bowed in apology at a press conference in Tokyo earlier this month.

After a three-week outage, the company resumed partial operation of the entertainment services this week. Restored operations include online gaming, chat service and music downloads. Sony plans to restart service in Asia soon, according to a May 15 statement.

Sony had failed to deliver on a May 1 pledge to put the network back into service within a week of its outage.

“There is no precedent for this in people’s experience,” Stringer said of the delays in bringing services back online. “Most reports now seem to indicate that we acted very quickly and very responsibly.”

Regulators’ Backlash

The April breach of the PlayStation and Qriocity networks affected 77 million accounts. Some 24.6 million accounts may have been compromised at the Sony Online Entertainment platform, a U.S. unit, the company said.

The attack may be the largest single breach of company data in history, Stringer said.

The company has faced a backlash from regulators over the time it took to warn customers their accounts had been compromised. Users were alerted of the breach April 27, six days after the shutdown of the movie and music-streaming services.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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