Cisco says shortages will disrupt the supply chain for the rest of the year

The US network equipment manufacturer said on Wednesday that many parts of the entire manufacturing industry are feeling supply chain tightening and will hit Cisco’s profit margins this quarter.

Although Cisco’s financial performance in the past quarter was stronger than expected, the warning still caused Cisco’s stock price in after-sales trading to fall by nearly 6%.

shortage semiconductor As a result, manufacturers are scrambling to secure enough key components, thereby pushing up prices and the cost of the entire supply chain.

Other companies have also reported interruptions in shortages, especially in the automotive industry, but from CiscoThe company’s accounting quarter ends one month after most companies, and it provides a more direct view of how you feel the pressure immediately.

Cisco warned that because it absorbed higher costs, its current quarter gross margin may be about 1.5 percentage points lower than the previous three months. The company also said that its revenue growth rate for the quarter was 6% to 8%, although higher than Wall Street’s expectations, it was still lower than there was no shortage of parts.

Chief Financial Officer Scott Herren said that the company had to pay higher prices to guarantee the delivery of chips and other key components within the next few months. It has also seen an increase in “exclusive expenses” or incurred costs such as air transportation to ensure that it has enough key components to keep the production line running normally.

“Supply chain issues will persist until at least the end of this calendar year,” Herren said.

Chief Executive Chuck Robbins (Chuck Robbins) said that Cisco has largely chosen to bear higher costs rather than raising prices. However, he said that if the company appears to bear higher costs at first, it will “consider whether it is necessary to increase strategic prices.”

Cisco executives claim that component shortages have allowed the rebound to shine, as it began to recover from the pandemic and began to see the benefits of shifting its business model to more profitable software and services.

The tremendous pressure caused by the shortage of chips has caused various types of companies to accumulate inventories of key components and products, which has led some analysts to question whether Cisco’s own sales have been artificially exaggerated. Robbins said the company has not seen any “red flags” to imply that customers are purchasing in advance, although he added: “We agree that there will be early warning signs.”

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