Cisco Forecast Knocked By Supply Chain Issues

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Shares in network gear maker Cisco fell 6.3% in extended trading after the company lowered its second-quarter revenue forecast to between 4.5% and 6.5% year-on-year, compared with Wall Street’s 7.4% forecast.

Companies around the world are in the midst of a severe semiconductor shortage that has driven up costs and hurt companies like Cisco that rely on chips for their products.

While Cisco said orders rose 33% in the first quarter that ended October 30, signalling robust demand, supply problems prevented growth from immediately translating into revenue.

Cisco CEO Scott Herren said in a statement that the technology company was also struggling with rising transportation and logistics costs.

“A lot more of the subcomponents are coming via air than would have come traditionally. “The port snarls have hit us in a couple of places,” Herren said.

Cisco is working to generate more revenue from software than hardware, but it still generates most of its revenue from hardware. It expects the September 1 price increases to take effect in the second half of its fiscal year as it continues to struggle with hardware backlogs.

Despite this, Cisco is sticking to its overall growth target of 5% to 7% for fiscal 2022, in line with analysts’ projections of 6%.

Herren said that a backlog of $15.9 billion in remaining contracts, 60% of which are for services and 40% for software, has given the company some stability amid hardware supply chain woes.

Revenue for the quarter ended October 30 was $12.90 billion, slightly above analysts’ average expectations of $12.98 billion.

For more information, read the original story in Reuters.

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