Refresh? No, F5 says supply of networking chips is still awful, getting worse...
(2022/01/26)
- Reference: 1643222707
- News link: https://www.theregister.co.uk/2022/01/26/f5_clips_revenue_forecast/
- Source link:
The artist formerly know as F5 Networks – it moved to plain old F5 in November – is clipping revenue forecasts for fiscal '22 by $30m to $90m because it can't source enough specialised chips to produce systems.
The continued impact of the shortfall was outlined in F5's Q1 results to 31 December and subsequent earnings conference call, during which chief exec François Locoh-Donou opened up on the challenge of suppliers cancelling orders because they can't meet demand.
"As a result of persistent strong system demand, our systems backlog continued to grow in Q1," he said. "Over the last 30 days, suppliers of critical components that span a number of our platforms have informed us of significant increases in decommits.
[1]
"These came in the form of both order delivery delays and sudden and pronounced reduction in shipment quantities. The step function decline in components availability is significantly restricting our ability to meet our customers' continued strong demand for our systems.
[2]
[3]
"Like others in the industry, we are seeing worsening availability of specialized networking chipsets. Within the last 30 days, we have learned that deliveries for 52-week lead time components or at a year ago have been pushed out and that our expected quantities have been reduced."
Group turnover grew 10 per cent year-on-year to $687m in F5's [4]Q1 , fuelled by a 47 per cent leap in software to $163m, 2 per cent in services to $344m, and 1 per cent in hardware to $180m.
[5]
"Our software transition continues to gain momentum," said Locoh-Donou, adding later in the earnings call: "While we are solely disappointed that supply chain challenges have gated our ability to fulfil customer demand for systems in the near term, we are more confident than ever in our position, our strategy and our long-term opportunity."
[6]Now that's wafer thin: Some manufacturers had less than five days of chip supplies, says Uncle Sam
[7]Dell: We and our customers understand the supply constraints now. The 'wildcard is logistics'
[8]Riverbed Technologies files for Chapter 11 bankruptcy protection following pandemic 'headwinds'
[9]Arista and Juniper hike prices as component lead times blow out to 80 weeks – that's May 2023
[10]Cisco thinks you're happy to wait ages for new kit, then pay premium prices
The backlog grew by 10 per cent so the sales pipeline is looking healthy, said the exec, who was at great pains throughout the call to tell analysts: "It absolutely is a supply issue. And the revision we've just done to our annual guidance is 100 per cent linked to the supply issue."
For the year, F5 now expects sales to grow 4-8 per cent ($610m to $650m).
"The issue with our supply chain has deteriorated steadily. And last year, we were not able to ship the demand, which is why our backlog grew so much during the year.
"Things have been getting worse. And at the beginning of our fiscal year, when we were doing the planning for this year, we actually took into account the number of decommits that we were getting from various suppliers and a situation that was already very tight on a number of components."
[11]
He said in the past month it was seeing more than 400 cancellations from suppliers, "and we were running about 30 per cent less than that even just a month ago – the situation is quite unprecedented."
In a bid to ameliorate the supply situation, F5 said it is working to design and qualify replacement parts – which may improve thing in the second half of the year. It is also trying to pre-order more components.
F5 is confident that it will not see orders cancelled. "The demand we have is very real. Our lead times, unfortunately, have gotten progressively worse over the last five, six quarters, but we haven't seen any increase in order cancellation, and we don't expect to see that going forward," Locoh-Donou stated.
Supply chain problems with silicon components have been hitting companies in the IT industry and beyond for multiple quarters now, and networking vendors are no less vulnerable.
Last year, [12]Arista warned that lead times for key chips were extending out to 60 weeks, twice what would be expected before the pandemic. Both Arista and Juniper announced they were being [13]forced to bump up prices in November, while Cisco warned its buyers and investors that supply chain issues were [14]likely to persist for several months more , although it expected to see some improvement in the situation for Q3 and Q4, taking us into the second half of 2022. ®
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[4] https://investors.f5.com/news/press-release-details/2022/F5-Reports-10-First-Quarter-Revenue-Growth-Led-by-Strong-Software-Demand/default.aspx
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YfHSmmDCCe8oCL74TTUr4AAAAEQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2022/01/25/doc_chip_shortages/
[7] https://www.theregister.com/2021/11/24/dell_hp_q3/
[8] https://www.theregister.com/2021/11/18/riverbed_technologies_chapter11/
[9] https://www.theregister.com/2021/11/04/arista_juniper_q3_price_rises/
[10] https://www.theregister.com/2021/11/18/cisco_q1_22/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YfHSmmDCCe8oCL74TTUr4AAAAEQ&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2021/08/03/networking_vendors_hit_by_supply_chain_component_shortages/
[13] https://www.theregister.com/2021/11/04/arista_juniper_q3_price_rises/
[14] https://www.theregister.com/2021/11/18/cisco_q1_22/
[15] https://whitepapers.theregister.com/
The continued impact of the shortfall was outlined in F5's Q1 results to 31 December and subsequent earnings conference call, during which chief exec François Locoh-Donou opened up on the challenge of suppliers cancelling orders because they can't meet demand.
"As a result of persistent strong system demand, our systems backlog continued to grow in Q1," he said. "Over the last 30 days, suppliers of critical components that span a number of our platforms have informed us of significant increases in decommits.
[1]
"These came in the form of both order delivery delays and sudden and pronounced reduction in shipment quantities. The step function decline in components availability is significantly restricting our ability to meet our customers' continued strong demand for our systems.
[2]
[3]
"Like others in the industry, we are seeing worsening availability of specialized networking chipsets. Within the last 30 days, we have learned that deliveries for 52-week lead time components or at a year ago have been pushed out and that our expected quantities have been reduced."
Group turnover grew 10 per cent year-on-year to $687m in F5's [4]Q1 , fuelled by a 47 per cent leap in software to $163m, 2 per cent in services to $344m, and 1 per cent in hardware to $180m.
[5]
"Our software transition continues to gain momentum," said Locoh-Donou, adding later in the earnings call: "While we are solely disappointed that supply chain challenges have gated our ability to fulfil customer demand for systems in the near term, we are more confident than ever in our position, our strategy and our long-term opportunity."
[6]Now that's wafer thin: Some manufacturers had less than five days of chip supplies, says Uncle Sam
[7]Dell: We and our customers understand the supply constraints now. The 'wildcard is logistics'
[8]Riverbed Technologies files for Chapter 11 bankruptcy protection following pandemic 'headwinds'
[9]Arista and Juniper hike prices as component lead times blow out to 80 weeks – that's May 2023
[10]Cisco thinks you're happy to wait ages for new kit, then pay premium prices
The backlog grew by 10 per cent so the sales pipeline is looking healthy, said the exec, who was at great pains throughout the call to tell analysts: "It absolutely is a supply issue. And the revision we've just done to our annual guidance is 100 per cent linked to the supply issue."
For the year, F5 now expects sales to grow 4-8 per cent ($610m to $650m).
"The issue with our supply chain has deteriorated steadily. And last year, we were not able to ship the demand, which is why our backlog grew so much during the year.
"Things have been getting worse. And at the beginning of our fiscal year, when we were doing the planning for this year, we actually took into account the number of decommits that we were getting from various suppliers and a situation that was already very tight on a number of components."
[11]
He said in the past month it was seeing more than 400 cancellations from suppliers, "and we were running about 30 per cent less than that even just a month ago – the situation is quite unprecedented."
In a bid to ameliorate the supply situation, F5 said it is working to design and qualify replacement parts – which may improve thing in the second half of the year. It is also trying to pre-order more components.
F5 is confident that it will not see orders cancelled. "The demand we have is very real. Our lead times, unfortunately, have gotten progressively worse over the last five, six quarters, but we haven't seen any increase in order cancellation, and we don't expect to see that going forward," Locoh-Donou stated.
Supply chain problems with silicon components have been hitting companies in the IT industry and beyond for multiple quarters now, and networking vendors are no less vulnerable.
Last year, [12]Arista warned that lead times for key chips were extending out to 60 weeks, twice what would be expected before the pandemic. Both Arista and Juniper announced they were being [13]forced to bump up prices in November, while Cisco warned its buyers and investors that supply chain issues were [14]likely to persist for several months more , although it expected to see some improvement in the situation for Q3 and Q4, taking us into the second half of 2022. ®
Get our [15]Tech Resources
[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YfHSmmDCCe8oCL74TTUr4AAAAEQ&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[4] https://investors.f5.com/news/press-release-details/2022/F5-Reports-10-First-Quarter-Revenue-Growth-Led-by-Strong-Software-Demand/default.aspx
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YfHSmmDCCe8oCL74TTUr4AAAAEQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://www.theregister.com/2022/01/25/doc_chip_shortages/
[7] https://www.theregister.com/2021/11/24/dell_hp_q3/
[8] https://www.theregister.com/2021/11/18/riverbed_technologies_chapter11/
[9] https://www.theregister.com/2021/11/04/arista_juniper_q3_price_rises/
[10] https://www.theregister.com/2021/11/18/cisco_q1_22/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_onprem/networks&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YfHSmmDCCe8oCL74TTUr4AAAAEQ&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[12] https://www.theregister.com/2021/08/03/networking_vendors_hit_by_supply_chain_component_shortages/
[13] https://www.theregister.com/2021/11/04/arista_juniper_q3_price_rises/
[14] https://www.theregister.com/2021/11/18/cisco_q1_22/
[15] https://whitepapers.theregister.com/
Hopefully the backlog clears up in the next 18 months, I've been running my gear for about as long as possible. I have switches that just hit 10 years of service last month(still under vendor support). My load balancers (Citrix, not F5) go EOL in Jan 2024, so hopefully in 18 months I can easily replace them that will mean they have had ~9 years of service(with 3 SSD failures across different units over that time, I guess the SSD quality Citrix uses is not great, most recently I had SSDs in both units in a pair start to fail, took 6 months to figure it out. Units would fail back and forth between each other every few weeks, support couldn't figure out the problem and blamed my network, eventually I saw the kernel messages showing the disk errors).
My primary flash storage array is in it's 7th year of service 0 hardware or software failures(other arrays are a bit more recent and have suffered a HD failure here and there, one had a memory chip go bad a couple years ago). Many servers are 6+ years old still running fine. Not planning on major server or storage changes before 2024. But the load balancers need to stay on vendor support, since they are fairly exposed. If not for end of life I would probably run the Netscalers far past next year as they have plenty of capacity averaging under 10% utilization on what was considered a low end unit in 2014(was their lowest cost unit that had dual power supplies).
I used F5 for nearly a decade, liked them a lot but when I last moved jobs decided to try Citrix, had heard good things but had no prior experience with them, now I have 10 years of experience(at the same company) and I like them, still like F5 too, lots of fond memories.