Cisco’s new product orders aren’t going quite as well as they should. The company has therefore adjusted its financial expectations. News that had an immediate impact on the share price.

Cisco shares plunged more than 10 percent yesterday after the company announced that it was completely unable to meet expectations for the second fiscal quarter. An important reason for this is that sales of new products are not going well.

Caught in inertia

First quarter results were positive, with eight US cents per share more than expected. Cisco collected almost a billion US dollars more in net costs than the year before.

However, Cisco saw a significant decline in orders for new products this quarter. The company attributes this primarily to the fact that customers are still installing and implementing newly delivered products.

At the height of the Corona crisis, Cisco was faced with a mountain of orders that could not be fulfilled. However, this accelerated again last year, partly due to the easing of lockdowns in China. This helped the supply chain get going again. Many customers are currently processing these products.

So the cycles are now running too slow. According to CE Chuck Robbins, many customers take their time processing all orders. Currently, Cisco customers are required to install an average of several quarters of orders. This would be a particular challenge for larger companies, service providers and cloud consumers.

Because of these issues, Cisco had lower expectations than analysts had predicted. It looks like Cisco will generate seven percent less revenue in the second quarter. For the year as a whole, the company expects lower sales but higher profits.

Cisco is therefore in a double situation. In fact, the company is a victim of the positive way it handled the pandemic.

The long-term prospects are good. For example, there is the historically large purchase of the security company Splunk, which is almost completed. For customers who are ready for new orders, there are collaborations with Nvidia and audio specialist Bang & Olufsen.