Cisco thinks its supply chain constraints are easing and should get better over the next few months.
The industry has been plagued with component shortages for 18 months and the channel has been managing inventories and customer expectations.
At the time Cisco thought that the situation would improve by the second half of the year. Cisco’s announcement of Q4 and fiscal year numbers, for the period ending 30 July confirmed the trend.
Cisco CEO Chuck Robbins said that after a challenging April due to the Covid-related shutdowns in Shanghai, and the impact on semiconductor and power supplies, overall supply constraints began to ease slightly in the fourth quarter and continue into the start of the first quarter.
“While the component supply headwinds remain, they have begun to show early signs of easing. The decisions we made and the multiple actions we have taken over the past two years are helping to improve our resiliency and will help offset cost inflation. These include adding new suppliers, leveraging alternative suppliers, redesigning hundreds of products to use alternative components with similar capability and targeted price increases, all of which position us for the future.”
Robbins touched on the challenges that were being faced, which as well as supply chain issues included rising inflation,
“While our business is not immune to macro trends, we will remain disciplined in our operations, while benefiting from robust multi-year investment trends and the technology transitions”, he said.
“Our innovation is helping our customers and partners navigate an increasing amount of complexity, and there is a greater sense of urgency to leverage leading-edge technologies to deliver on their strategic objectives.”
Cisco’s fourth quarter revenues were flat year-on-year at $13.1 billion, with a three per cent improvement for the fiscal year at $51.6 billion.
The firm also pointed to its eight per cent year-on-year growth in the fourth quarter annualised recurring revenue (ARR) at $22.9 billion as evidence that the business is transforming.
Given the easing of supply chain constraints, high levels of bookings and a growing inventory waiting to be shipped, Cisco indicated that, looking ahead, it is expecting revenue growth of about four to six per cent year-on-year in 2023.
Robbins added: “Full-year product orders and backlog are both at record highs and reflect the strong demand we continue to see for our innovation and the overall value we bring to our customers as they accelerate their digital transformation.”
