04:40 PM EDT, 08/05/2024 (MT Newswires) -- CrowdStrike Holdings ( CRWD ) is expected to face "minimal" overall liability risk from the July 19 global technology outage, though the risk to new business continues to be a concern, Wedbush Securities said Monday.

The outage stemmed from an update the cybersecurity company deployed for its Falcon sensors on Microsoft ( MSFT ) Windows systems, affecting several industries, banks, health care organizations and airlines, including Delta Air Lines ( DAL ) . The carrier has reportedly hired attorney David Boies to seek potential damages from CrowdStrike ( CRWD ) and Microsoft ( MSFT ) due to the outage, Wedbush said in a Monday note to clients.

Delta Air Chief Executive Ed Bastian said on CNBC's "Squawk Box" last week that the outage cost the airline $500 million.

Delta Air has threatened the cybersecurity company with legal claims pertaining to the outage in a July 29 letter, CrowdStrike's ( CRWD ) legal counsel, Michael Carlinsky, said in a letter sent to Boies on Sunday. CrowdStrike ( CRWD ) "strongly rejects" any allegation that the company was negligent in addressing the issue, Carlinsky wrote, adding that the company reached out to Delta Air within hours of the incident to offer support.

Delta's public threat of litigation "has contributed to a misleading narrative that CrowdStrike ( CRWD ) is responsible for Delta's IT decisions and response to the outage," Carlinsky said. Any liability by CrowdStrike ( CRWD ) is contractually capped at an amount in the single-digit millions, according to the letter.

"Third parties have sized losses at US F500 companies in the ($5 billion-to-$6 billion) range," Wedbush analysts, including Taz Koujalgi, said in the Monday note. "Based on this number, we estimate the overall losses could be in the ($7 billion-to-$8 billion) range, and extrapolating from the single-digit million liability cap for Delta, we would estimate the overall liability risk would be in the ($200 million) range, and a lot less than feared."

CrowdStrike ( CRWD ) shares closed 1.9% higher on Monday, but are down 13% so far this year.

"While litigation would be unfortunate, CrowdStrike ( CRWD ) will respond aggressively, if forced to do so, in order to protect its shareholders, employees, and other stakeholders," Carlinsky wrote.

"We have expressed our regret and apologies to all of our customers for this incident and the disruption that resulted," a CrowdStrike ( CRWD ) spokesperson told MT Newswires in an e-mailed statement on Monday. "Public posturing about potentially bringing a meritless lawsuit against CrowdStrike ( CRWD ) as a long-time partner is not constructive to any party. We hope that Delta will agree to work cooperatively to find a resolution."

A spokesperson for Delta directed MT Newswires to Bastian's comments on CNBC's Squawk Box on July 31.

Experts have told Wedbush that CrowdStrike's ( CRWD ) user contracts are "very favorable" to the company and include liability limitations and prohibition on collection for revenue losses, according to the Monday note. Given that the outage was not deliberate, malicious or fraudulent, the risk of material liability or damages to CrowdStrike ( CRWD ) from the outage is "minimal," the analysts wrote.

However, the risk to new business is still a concern, they said. "Given the outage, the company will have less negotiating leverage, which could in turn jeopardize upsells and cross-sell opportunities, and lead to contract renewals on less favorable terms for (CrowdStrike ( CRWD )), or the possibility of disgruntled customers not renewing and instead going to competitors."

However, a material churn of customers is "highly unlikely" amid a lack of CrowdStrike ( CRWD ) competitors and potentially significant transition costs for customers, the analysts wrote.