This is colossally bad for RSA and users of their SecurID tokens:
RSA Security is to replace virtually every one of the 40 million SecurID tokens currently in use as a result of the hacking attack the company disclosed back in March. The EMC subsidiary issued a letter to customers acknowledging that SecurID failed to protect defense contractor Lockheed Martin, which last month reported a hack attempt.
SecurID tokens are used in two-factor authentication systems. Each user account is linked to a token, and each token generates a pseudo-random number that changes periodically, typically every 30 or 60 seconds. To log in, the user enters a username, password, and the number shown on their token. The authentication server knows what number a particular token should be showing, and so uses this number to prove that the user is in possession of their token.
The exact sequence of numbers that a token generates is determined by a secret RSA-developed algorthm, and a seed value used to initialize the token. Each token has a different seed, and it’s this seed that is linked to each user account. If the algorithm and seed are disclosed, the token itself becomes worthless; the numbers can be calculated in just the same way that the authentication server calculates them.