A power outage at a Delta Air Lines, Inc. (NYSE:DAL) computing center near Atlanta grounded the global airline overnight on Aug. 8, creating the biggest crisis in new CEO Edward Bastian’s career. Bastian became CEO in May, taking over from Richard Anderson, who was named executive chairman, but Delta stock was down nearly 2% early Monday after a power outage that began around 2:30 a.m.
Georgia Power reported an outage impacting 266 of its customers near Atlanta’s Hartsfield-Jackson International Airport; however, it denies that its equipment caused DAL’s computer problem. Delta has also been advertising for a data architect since late last week.
This is not the first such problem Delta stock has had. Problems with the company’s check-in technology caused major headaches for travelers in February, 2015. Rival Southwest Airlines Co (NYSE:LUV) also suffered an outage a month ago that created flight delays.
Bad Timing for Delta Stock
The problem occurred just weeks after Delta reported adjusted net income of $1.1 billion, $1.47 per share, on total revenue of $10.45 billion, down 2.4% from a year earlier.
The numbers did not help DAL stock, which has fallen about 5% since the earnings came out, with the pre-market losses nearly wiping out Friday’s gain of 3%. Like other airlines, Delta stock is one of the market’s great bargains, with a price-to-earnings multiple of about six despite dividends that yield 2.15% at Friday’s close.
Most analysts have a buy rating on the stock, based on its valuation but the stock has been a bargain for a very long time, and is now down almost 25% from the level it held at the start of 2015.
Like many other industries, such as financial transaction processing, Delta is in the position of trying to re-build a freeway while traffic continues to flow.
Cloud technology has been a dominant form of computing since the start of the current decade, but many companies still rely on mainframe or, if they were modernizing, client-server technology in central data centers for their computing needs.
Upgrading these centers, or moving them into cloud technology, is an enormously difficult task, one that could take many years to accomplish.
The latest outage may have started with an Atlanta power cable, but it was affecting a global network, delivering real headaches that reporters, and the victims themselves, find easy to document via social media.
Operations are expected to be impacted through all of Aug. 8 and will be reflected in the third-quarter earnings report, due out Oct. 13, where analysts have been expecting earnings of $1.76 per share, up substantially from the last quarter, on revenues of $10.89 billion.
Those numbers may be hard for Delta stock to achieve now.
Dana Blankenhorn is a financial journalist who dabbles in fiction, his latest being The Reluctant Detective Travels in Time. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.