Cisco Response To Supply Chain Woes Lacking, Say Partners

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As Cisco prepares to announce quarterly earnings for its fiscal Q3 Wednesday, many Cisco channel partners are still feeling the effects of supply chain issues that have hammered the Cisco channel for much of the past year. And several have called Cisco into question over whether the networking titan adequately addressed those issues in a public way.

Following a roughly six-to-eight month period of product shortages and ballooning lead times, most of Cisco's top executives acknowledged the supply chain issue directly at the Cisco Partner Summit in San Francisco two weeks ago.

Keith Goodwin, Cisco's senior vice president of worldwide channels, apologized from the stage and acknowledged the "impact it's having on business." Randy Pond, executive vice president of operations, processes and systems, blamed components shortages, a shift in the Chinese labor force thanks to China's economic stimulus, and the magnitude of the business-drop off during 2009.

Even Cisco Chairman and CEO John Chambers weighed in, admitting during his keynote that Cisco had "misread" the situation.

Cisco declined to offer additional comment beyond what was said at Partner Summit, citing its quiet period, which will end when Cisco announces Q3 earnings at 4:30 p.m. EST Wednesday.

Earnings are expected to be another positive story following a stellar return to form by Cisco in the last quarter. According to a Thomson Reuters poll of analysts, Wall Street expects Cisco profits to report 38 cents per share compared to 30 cents per share in the year-ago quarter, on about $10.23 billion in revenue, or 25 percent revenue growth.

But swagger aside, the supply chain issues are what's still writ large for a number of Cisco partners.

"It's been very impactful to our business negatively," said Andy Cadwell, vice president of sales for INX, a Houston solution provider and Cisco Gold partner. "Number one, it was not being able to set customer expectations correctly, and number two, we can't really implement technology solutions until all of the products are either on our site or the customer site, so it's been impacting our services business as well."

Among solution providers, INX is one of the more public examples of how Cisco's supply chain woes have stymied solution provider profits. In a form 10-Q that INX filed with the Securities & Exchange Commission dated Nov. 12, 2009, INX details an overall revenue decrease of 19.6 percent, and a products revenue decrease of 21.4 percent for the period.

"The decrease in products revenue was primarily due to unanticipated product availability issues from our key manufacturer supplier, Cisco Systems Inc.," writes INX in the 10-Q.

INX's issues with Cisco product shortage also came up in a Form 8-K INX filed on March 26. In it, INX acknowledges that Cisco product deliveries "improved somewhat during the quarter" and that net billings to customers increased by about 27 percent compared to the third quarter.

"At the same time, partial shipments of orders made up a larger than normal portion of total shipments due to continued product availability issues," reads the 8-K.


Next: Shortages Hit Home

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