Shares of Cisco Systems Inc. plunged in an extended session on Wednesday after Tech Belvedere’s revenue forecast fell short of Wall Street’s expectations by 1 billion, prompting executives to blame COVID shutdown in China.
Shares fell 13% after closing at .3 48.36 after falling 4.4% in the regular session.
Cisco forecast revenue declines of 5.5% to 1% year-over-year, or financial quarter-quarter earnings in a range between $ 12.1 billion and $ 12.67 billion, a share of 76 cents to 84 cents. Analysts surveyed by Factset estimated 92 cents shares at $ 13.87 billion in revenue.
That guideline forced Cisco to cut its annual forecast, leaving only a few months to go into its fiscal year. After consistently predicting revenue growth of 4.5% or better this fiscal year, Cisco executives downgraded their outlook on sales growth from 2% to 3% for the year, as well as lowering their annual forecast for consistent profit.
In a conference call on Wednesday afternoon, executives said supply problems in China have been exacerbated by the Kovid lockdown.
“We have no plans to shut down any country,” said Cisco chief executive and chairman Chuck Robbins.
Chief Financial Officers Scott Haren and Robbins both said the forecast disappointed “100% supply”. Robbins told analysts that the company is sitting on record backlogs and record inventory.
Robbins explained that since the company’s financial quarter ended in April, it was facing a full quarter of lockdowns in China, as opposed to the quarter ended in March. When China locked Shanghai from March 27, it threw a monkey wrench into Cisco’s ability to get material.
“We’re really talking about the Shanghai situation, so we had $ 200 million from Russia, and then we had $ 300 million, which is entirely due to our inability to get power supplies from China,” Robbins said. “It’s the simplicity that causes the problem.”
“In Shanghai, we have a lot of components in our power supply, so we are not able to get those components,” Robbins explained. “Shanghai now says they are going to open on June 1st.”
“We don’t know exactly what that means, and what it means when we start getting supplies,” Robbins said. “And accordingly, we believe that when they open up and when they allow transportation to start, we believe there is going to be a high level of traffic congestion.”
While Robbins uses the power-supply component as an example, CFO Herren adds that the supply problem extends to many more components.
“It’s not just a power supply,” Herren said. “It simply came to our notice then. I’ve tried to give you an idea of the scale because I know it’s 41,000 unique components, about 350 of what we’ve said are potential supply concerns at the moment. “
Cisco reported third-quarter earnings of $ 3.04 billion, or 73 cents per share, up from $ 2.86 billion or 68 cents per share a year earlier. Consistent earnings, excluding stock-based compensation costs and other items, were 87 cents per share, compared to 83 cents in the same period a year earlier. Revenue was virtually flat at $ 12.83 billion, compared to $ 12.8 billion in the year-ago quarter.
Analysts surveyed by Factset forecast a consistent earnings per share of 86 cents on revenue of $ 13.37 billion, based on Cisco’s সেন্ট 13.19 billion to $ 13.44 billion earnings of 85 cents to 87 cents per share.
The company said “secure, agile network” sales rose 4% to 5.87 billion; Hybrid work, or collaboration, sales fell 7% to 1.13 billion; “Internet-for-the-Future” sales rose 6% to 1.32 billion; And end-to-end security sales rose 7% year-over-year to $ 938 million. Analysts forecast “secure, agile network” sales of 6.1 billion, “hybrid work” sales of $ 1.13 billion, IFTF sales of $ 1.44 billion, and end-to-end security sales of $ 930.8 million.
Total product sales rose 3% to $ 9.45 billion, compared to an estimated $ 9.81 billion on the road, and service revenue fell 8% to $ 3.39 billion, while analysts expected 3.54 billion.
According to the CEO, supply problems due to the China lockdown have also affected software sales at Cisco. On Wednesday, Robbins said the company had a software backlog of “over 2 2 billion” that was “connected to a piece of hardware that we will not begin recognizing revenue until the hardware is shipped.”
Last week, Shelley Blackburn, Cisco’s vice president of security sales and a 22-year-old veteran of the company, took a look at Cisco’s security business following the news that he was leaving the company. Cisco has not confirmed such a move. As of Wednesday, Blackburn’s Twitter And the LinkedIn pages still list him on Cisco.
Last quarter, Robbins acknowledged that the company needed to improve its security business, and overall told MarketWatch that supply-chain issues did not get better but worse. Supply-chain problems have plagued Cisco for more than a year now that most of its manufacturers have relied on semiconductors amid global chip shortages.
“I would say we have room to do better in terms of security, and the teams are working hard on that,” Robbins told analysts three months ago.
Fortinet Inc. FTNT,
Or Checkpoint Software Technologies Ltd. CHKP,
In the last 12 months, Cisco shares have fallen 9% since Wednesday’s close, compared to the Dow Jones Industrial Average DJIA’s 7% fall,
Including a component of Cisco, a 10% drop for the S&P 500 Index SPX,
And technology-heavy Nasdaq composite index fell 16% by comp,