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A modified variant of the Code Red Worm, dubbed Code Blue, has been uncovered by Chinese antivirus researchers.

The worm has the potential to cause more damage to users of Microsoft Windows NT and Windows 2000 than earlier Code Red variants, according to a statement released Friday by Beijing-based software vendor Kingsoft.

In addition, Code Blue acts to counter the effects of Code Red by deleting the worm if it is present and changing files to prevent future infections, according to Moscow-based antivirus firm Kaspersky Labs.

Kingsoft did not give an indication of just how many users have so far been affected by the worm.

Denial of Service

Like earlier variants of Code Red, Code Blue launches a denial of service attack. But unlike other variants, which launched a denial of service attack against the White House Web site, the Code Blue worm instead attacked an IP address (211.99.196.135) associated with the Web site of a Chinese network security provider, NSFocus Information Technology, from 10 a.m. to 11 a.m. UTC (Coordinated Universal Time, 6 a.m. to 7 a.m. EDT).

At approximately 4 p.m. EDT, the NSFocus Web site and the targeted IP address were observed to be functioning normally.

When Code Blue has infected a system, it uploads the worm file from another infected machine and creates several new files in a computer's root directory in an attempt to conceal itself, according to a virus alert sent out late Friday by Kaspersky Labs.

Code Blue creates files called httpext.dll, svchost.exe, and d.vbs, the alert says. The first two are names of standard, non-malicious Windows NT/2000 files. By using these files, the worm attempts to keep itself from being discovered, Kaspersky says.

Start Me Up

This copy of svchost.exe, however, is a malicious file installed in the start-up section of Windows, designed to ensure that the worm is activated every time the system is restarted, Kaspersky says.

D.vbs acts to combat Code Red by removing all active copies of the worm from the system's memory and by making unspecified changes to the system to prevent further Code Red infections, the company says. Like Code Red, Code Blue spawns 100 threads that search random IP addresses for other vulnerable systems.

Code Red was first discovered in mid-July, but made its biggest splash after infecting hundreds of thousands of computers worldwide in August.

Code Blue is deemed more threatening to users than earlier Code Red variants because, unlike Code Red, Code Blue gradually increases its usage of system resources and, if not stopped, can bring computers running Windows NT or Windows 2000 to a halt, the Kingsoft statement says. By comparison, computers affected by Code Red were largely able to continue functioning normally with no obvious degradation in system performance.

Targeting Microsoft

Earlier variants of the Code Red worm exploited a single buffer overflow vulnerability in versions of Windows NT and Windows 2000 running Internet Information Server. A buffer overflow vulnerability opens when space in a program's code that is reserved for transaction protocols is violated by a malicious program.

By comparison, Code Blue exploits multiple system vulnerabilities, including a Web server folder traversal vulnerability first announced by Microsoft late last year, the statement says. The Web server folder vulnerability in IIS is exploited by using a malformed URL address to access files and folders on a specific drive. This gives a malicious user control of a machine, including the ability to change or delete data and upload and run code on the server.

Information on the Web server folder traversal vulnerability and a patch can be found on Microsoft's Web site.

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