Cisco blamed COVID-19 lockdowns in China and the war in Ukraine for its flat revenue growth during the fiscal third quarter, and forecast for a declining current quarter when it reported earnings late Wednesday.
Supply shortages appear to be the largest culprit, and CEO Chuck Robbins said during a conference call Wednesday that the company’s disappointing revenue was the result of its inability to secure adequate components to sell its various products. The lockdowns in China were especially damaging, Robbins said.
“These lockdowns resulted in an even more severe shortage of certain critical components. This, in turn, prevented us from shipping products to customers at the levels we originally anticipated heading into Q3,” Robbins said.
Cisco, which makes networking products that include semiconductors, has struggled for over a year as the chip shortage drags on and enterprises continue to move their applications out of their own data centers and into major cloud computing providers, which tend to design and build their own networking equipment. But CFO Scott Herren said the company is trying to figure out ways around the component supply issues.
"To give a sense of scale of the shortages, we currently see constraints in Q4 on roughly 350 critical components out of a total of 41,000 unique component part numbers. Our supply chain team is aggressively pursuing multiple options to close those shortages,” Herren said.
The Russian invasion of Ukraine damaged revenue by roughly $200 million, according to the company. Cisco said it had announced it stopped doing business in Russia and Belarus, and that those two countries plus Ukraine historically accounted for about 1% of the company’s revenue.The news was a surprise to Wall Street, and well below analyst expectations, CNBC reported. Cisco said it now expects its fourth-quarter revenue to decline between 1% to 5.5%, when analysts had expected growth of 6%. Shares plunged as much as 21% in after-hours trading.