Cisco thinks you're happy to wait ages for new kit, then pay premium prices
- Reference: 1637222226
- News link: https://www.theregister.co.uk/2021/11/18/cisco_q1_22/
- Source link:
In remarks delivered during the company's Q1 FY22 earnings call for the three months ended 30 October, CEO Chuck Robbins said that in the first half of the quarter Cisco saw "some deterioration" in component availability, before the situation stabilised.
"We are planning on seeing some slight improvement in Q3 and Q4," he said. "We don't expect a lot of it. We expected to remain stabilized in Q2 and then we think we'll see some slight improvement in the second half of our fiscal year. That's our current belief based on what we know today."
[1]
Chief financial officer Scott Herren said Cisco's supply chain teams continue to point out the company is a big buyer that will be around for years to come when negotiating with suppliers. Nonetheless it still expects supply "challenges and cost impacts … will continue into the second half of fiscal 2022.
[2]
[3]
"We saw better visibility to components from some of our suppliers in terms of when they could deliver the quantities," he said. Suppliers cancelled fewer orders, and memory prices are "beginning to decline a bit".
Herren said supply chain challenges mean Cisco's backlog of orders is at an all time high $15.9 billion, so Cisco has committed customers to its products. Now all it must do is find the parts it needs, build those products, and get them into customers' hands.
[4]
But the company may not need to rush: Robbins said cancelled orders are running at lower than historical rates, and that customers feel they need to upgrade their networks to be ready for whatever crisis the world dishes up next (after often being caught flat-footed by COVID-19).
[5]Cisco warns 'unintentional debugging credential' left in some network switches can be abused to hijack equipment
[6]Arista and Juniper hike prices as component lead times blow out to 80 weeks – that's May 2023
[7]Cisco requires COVID-19 shots for all US staff – even remote workers
Q1 results were solid. The networking giant reported $12.9 billion of revenue, an eight percent year-over-year increase. Net profit was up 37 per cent to $3bn.
Software and subscriptions, the two areas in which Cisco most covets growth, both delivered slight growth – one per cent and four per cent respectively. Herren said the security-related subscription revenue grew 15 per cent in the quarter, suggesting that performance shows Cisco's transition to subs is real.
Orders from big customers such as clouds and carriers grew by 200 per cent and they continue to plan purchases three and four quarters into the future. Robbins suggested that behaviour, and Cisco's growth, shows that customers don't object to the company's recent price rises or the long wait for products. ®
Get our [8]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=2YZYyX6By5UQjNH2glLqEDQAAAAQ&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[2] 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=44YZYyX6By5UQjNH2glLqEDQAAAAQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[3] 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=33YZYyX6By5UQjNH2glLqEDQAAAAQ&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[4] 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=44YZYyX6By5UQjNH2glLqEDQAAAAQ&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[5] https://www.theregister.com/2021/11/05/cisco_unintentional_debugging_credential_security_alert/
[6] https://www.theregister.com/2021/11/04/arista_juniper_q3_price_rises/
[7] https://www.theregister.com/2021/11/03/cisco_updates_covid_19_vaccination_policy/
[8] https://whitepapers.theregister.com/
cancellations are down
I'd expect a large continuing uptick in cloud and carrier orders given recent events.
The price hike has forced our project managers to resubmit new costings for all future activity, any cancellations will happen long before Cisco see any orders.
Future activity is also highly constrained by the fact that we're still waiting for products ordered in the first half of this year and there's a finite amount of cash that the company can have sitting waiting ready for things to appear - We buy kit to support activities that contribute to the bottom line.
Re: cancellations are down
I dunno. Once upon a time, carriers bought Cisco and Juniper. Now, probably less so. If your network is mostly optical, they don't really play in that space. If your space is Ethernet, they don't really play their either. They're typically the most expensive way to deliver a VLAN in pretty much every capex and opex sense. And the incessant drive for 'service' revenue hasn't exactly endeared them with carriers either.
Some disruption has occurred thanks to trade spats and the world catching a cold. That's also allowed profiteering. But the supply chain shifts, and capacity that was supplying Cisco can just as easily supply commodity switches. For a fraction of the cost of a 'premium' brand.
Lead times
We're being quoted lead times of up to six months for Cisco Catalyst switches. That's on top of the never ending price rises.
"customers feel they need [..] to be ready for whatever crisis the world dishes up next"
I'm guessing that mostly concerns carriers.
By now, businesses either have adapted or don't need to, but carriers were definitely caught out - especially the ones that oversold their capacity.