Omicron, semiconductor shortages blow out Cisco’s delivery times

Enterprises and service providers waiting for Cisco kit will have to keep waiting, with the networking vendor warning product shortages will continue for the foreseeable future.

During the company’s earnings call on Thursday, chairman and CEO Chuck Robbins noted that the company’s order backlog grew 150 percent year-on-year, with US$14 billion (A$19 billion) worth of product waiting for delivery.

“Our supply chain team continues to take aggressive action through strong inventory positions, deepening supplier relationships, qualifying alternative components and increased use of expedited freight”, Robbins said.

He noted that the backlog doesn’t only impact hardware revenue. Undelivered hardware also means undelivered software, impacting software revenue growth.

While the backlog will “convert into revenue in the coming quarters”, it’s not great news for customers waiting for product.

Asked when the company expects this situation to unwind, Robbins said: “I wouldn't say we have a great time line for you as to when things begin to improve”.

Chief financial officer Scott Herren added that the situation will “unwind as supply and demand get more in balance”, something that will only happen gradually.

While Robbins attributed some of the backlog to the Covid-19 Omicron variant keeping people home from factories, it’s clear that semiconductor shortages are also a problem. 

Herren said the company’s operating cashflow took a US$2.5 billion hit, “primarily driven by advance payments to secure future supply”.

Despite operating in what Robbins called “a supply constrained and inflationary environment”, Cisco turned in revenue of US$12.7 billion, up 6 percent year-on-year, and net profit of nearly US$3 billion.

Cisco isn’t the only enterprise/service provider vendor to have trouble meeting demand.
In its late January earnings call, Juniper Networks’ reported a US$1.8 billion backlog.

CEO Rami Rahim cited component supply as the chief reason for Juniper’s backlog, adding that he expects the backlog to remain “largely unchanged throughout the year”.