Cisco forecasts growth from software shift, but chip prices pressure profits


Sumary of Cisco forecasts growth from software shift, but chip prices pressure profits:

  • Article content Cisco Systems Inc on Wednesday forecast that within four years, about half its revenue will come from software and other recurring sales, but its chief financial officer told Reuters high chip prices in its hardware business will keep pressuring overall profits.
  • Piper Sandler analyst James Fish told Reuters that Cisco’s outlook implies that profit margins will stay flat, but Wall Street was hoping for margin growth from Cisco’s shift to software.
  • Cisco Chief Financial Officer Scott Herren said the company’s software units do have higher margins than its hardware business, but some subscription revenue will also come from services that have lower margins than software.
  • “The component shortages that everyone’s dealing with right now have led to price increases, and those price increases are going to be with us for quite some time,” Herren told Reuters in an interview.

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