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Cisco crashes to 18-month low as China lockdown raises supply doubts

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(Reuters) -Cisco Systems Inc shares on Thursday touched an 18-month low after the company warned of persisting shortages in components, worrying Wall Street on how exports could suffer due to China's COVID restrictions and the Ukraine crisis.

Shares of the company, which lowered its full-year growth forecast, were down about 13% at $42.4 and dragged peers Juniper Networks, F5 Inc and Arista Networks down 1% to 3.1% in early trade.

Enterprise-focused firms such as Cisco, which benefited as companies spent to upgrade technology infrastructure to incorporate hybrid work, have faced challenges due to a shortage in components which has worsened since key supply hub China implemented stringent COVID lockdowns in April.

"The entire industry is supply constrained. We recognize Cisco is a different scale than its competitors, but we point out that peers are not seeing this level of disruption," Needham analyst Alex Henderson said.

Cisco has a backlog of $15 billion in products, including $2 billion in software, a record value of orders that are yet to be delivered to customers. The company said cancellation rates were lower than pre-pandemic times.

"FY23 is set up to be more about supply than demand, even as orders will likely decline on tough comps," said JP Morgan lead analyst Samik Chatterjee, adding that Cisco's order backlog provides some support.

The San Jose, California-based company took a $200 million hit after ceasing operations in Russia and Belarus last quarter and forecast a decrease of 1% to 5.5% in current-quarter revenue, partly due to slower imports of key components from China.

Meanwhile, analysts flagged rising competition.

Software business seems to be underperforming while "core enterprise/commercial of the core hardware business appears to be donating share to competitors," Piper Sandler lead analyst James Fish wrote in a note.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Krishna Chandra Eluri)

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