Qualys (NASDAQ:QLYS) shares fell more than 10% Monday after Morgan Stanley analysts flagged the risks to the company's top line after Microsoft recently announced plans to end its OEM partnership with the company.
The investment bank explained that Microsoft recently announced plans to end its OEM partnership with Qualys as the default provider of vulnerability scanning within Microsoft Defender, effective May 1st.
With Morgan Stanley calculating that Microsoft represents between 5% and 10% of Qualys revenue, they feel the end of the partnership presents a "material risk" to the company's topline as existing Defender customers migrate.
"Though the announcement does not indicate a termination of their relationship with Qualys as a customer, we see risk of Microsoft having its own VM solution leading to a potential downsizing or replacement of its existing Qualys deployment," the analysts wrote.
"With VMDR now >54% penetrated with the existing installed based, we see topline pressures mounting over the next 12-24 months," they added, maintaining an Underweight rating and $150 price target on the stock.