Cisco predicts weak gains as supply chain problems raise costs for Reuters

(Reuters) – Cisco Systems Inc. (NASDAQ 🙂 forecast lower quarterly earnings than expected, as supply chain problems included high chip prices as costs rose in the network hardware business as its shares fell 6.3%.

Businesses around the world have faced an unprecedented shortage of semiconductors, which has increased costs, hurting companies like Cisco that use chips in routers.

The company had a “very dynamic supply environment” in the quarter, CEO Chuck Robbins said in a statement.

Cisco expects second-quarter revenue to grow between 4.5% and 6.5% year-on-year, compared to Wall Street’s expectation of about 7.4%.

The company said its orders grew by 33%, indicating high demand, even though supply problems prevented revenue from turning in the quarter.

Cisco, best known for its network hardware, expects to generate nearly half of its revenue from software and other recurring sales within four years.

Industry experts say Cisco will benefit from the boom in cloud computing and 5G adoption in an increasingly digital world. But supply issues, such as chip shortages and shipping bottlenecks, which will continue to affect the sector in the short term, have prevented the company and its partners from taking advantage of strong demand.

The San Jose, California-based company said it expects second-quarter earnings per share to be between 80 cents and 82 cents, and at the midpoint the 82-cent estimates for Refinitiv IBES are just short.

Revenue for the quarter ended Oct. 30 was $ 12.9 billion. Analysts expected an average revenue of $ 12.9 trillion, according to Refinitiv’s IBES data.