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

By Stephen Nellis and Sinéad Carew (Reuters) - Cisco Systems Inc (NASDAQ:CSCO) on Wednesday forecast that within four years, about half its revenue will come from software and...
Cisco forecasts growth from software shift, but chip prices pressure profits © Reuters. FILE PHOTO: A man passes under a Cisco logo at the Mobile World Congress in Barcelona, Spain February 25, 2019. REUTERS/Sergio Perez/File Photo

By Stephen Nellis and Sinéad Carew

(Reuters) - Cisco Systems Inc (NASDAQ:CSCO) 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.

Cisco is the biggest maker of networking gear for data centers and corporate campuses, but it is shifting toward selling recurring subscriptions for software such as its WebEx collaboration service and cybersecurity services.

At an event with Wall Street analysts, Cisco said it believes the portion of its revenue coming from subscriptions will rise from 44% notched for its fiscal 2021 ended July 31 to 50% by fiscal 2025.

The company gave a fiscal 2025 revenue forecast with a midpoint of $62.9 billion, saying it expects a compound annual growth rate of 5% to 7%. Cisco predicted the same growth rate for adjusted profits, targeting a midpoint of $4.07 per share in fiscal 2025.

Cisco shares closed down 0.5% at $57.56 after the event. 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.

But Herren said a global shortage of parts such as computing chips, memory chips and even power supplies will pressure gross margins in the company's hardware business, which Cisco also forecasts will keep growing.

"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. "We're a (Taiwan Semiconductor Manufacturing Co) customer, and they did an across the board price increase the range anywhere from 8% to 20%. We are subject to that."

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21-09-2021 06:17:14 (UTC+7)

EUR/USD

1.1725

0.0001 (0.00%)

Summary

Sell

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (1)

Sell (5)

EUR/USD

1.1725

0.0001 (0.00%)

Summary

Sell

Moving Avg:

Buy (5)

Sell (7)

Indicators:

Buy (1)

Sell (5)

GBP/USD

1.3657

0.0001 (0.00%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (8)

USD/JPY

109.39

-0.01 (-0.00%)

Summary

↑ Sell

Moving Avg:

Buy (3)

Sell (9)

Indicators:

Buy (0)

Sell (9)

AUD/USD

0.7254

+0.0004 (+0.06%)

Summary

↑ Sell

Moving Avg:

Buy (4)

Sell (8)

Indicators:

Buy (1)

Sell (8)

USD/CAD

1.2815

-0.0010 (-0.08%)

Summary

Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (5)

Sell (1)

EUR/JPY

128.26

0.00 (0.00%)

Summary

↑ Sell

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Buy (0)

Sell (12)

Indicators:

Buy (0)

Sell (9)

EUR/CHF

1.0879

+0.0003 (+0.03%)

Summary

↑ Sell

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Buy (1)

Sell (11)

Indicators:

Buy (0)

Sell (7)

Gold Futures

1,764.95

+1.15 (+0.07%)

Summary

↑ Buy

Moving Avg:

Buy (11)

Sell (1)

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Buy (7)

Sell (1)

Silver Futures

22.253

+0.049 (+0.22%)

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↑ Sell

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Sell (9)

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Copper Futures

4.1270

+0.0020 (+0.05%)

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↑ Sell

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Crude Oil WTI Futures

70.44

+0.30 (+0.43%)

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Brent Oil Futures

74.24

+0.18 (+0.24%)

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Natural Gas Futures

4.946

-0.011 (-0.22%)

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US Coffee C Futures

182.30

-4.10 (-2.20%)

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Buy (0)

Sell (12)

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Buy (0)

Sell (8)

Euro Stoxx 50

4,043.63

-87.21 (-2.11%)

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↑ Sell

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S&P 500

4,357.73

-75.26 (-1.70%)

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↑ Buy

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Buy (9)

Sell (1)

DAX

15,132.06

-358.11 (-2.31%)

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↑ Buy

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Buy (3)

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FTSE 100

6,903.91

-59.73 (-0.86%)

Summary

Neutral

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Buy (6)

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Buy (2)

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Hang Seng

24,099.14

-821.62 (-3.30%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

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US Small Cap 2000

2,178.78

-58.09 (-2.60%)

Summary

↑ Buy

Moving Avg:

Buy (8)

Sell (4)

Indicators:

Buy (6)

Sell (1)

IBEX 35

8,655.40

-105.50 (-1.20%)

Summary

↑ Sell

Moving Avg:

Buy (2)

Sell (10)

Indicators:

Buy (0)

Sell (9)

BASF SE NA O.N.

61.660

-1.425 (-2.26%)

Summary

↑ Buy

Moving Avg:

Buy (12)

Sell (0)

Indicators:

Buy (8)

Sell (0)

Bayer AG NA

45.23

+0.16 (+0.36%)

Summary

↑ Sell

Moving Avg:

Buy (3)

Sell (9)

Indicators:

Buy (0)

Sell (10)

Allianz SE VNA O.N.

183.86

-6.37 (-3.35%)

Summary

↑ Buy

Moving Avg:

Buy (10)

Sell (2)

Indicators:

Buy (5)

Sell (4)

Adidas AG

280.52

-1.08 (-0.38%)

Summary

Neutral

Moving Avg:

Buy (9)

Sell (3)

Indicators:

Buy (2)

Sell (6)

Deutsche Lufthansa AG

8.664

+0.454 (+5.53%)

Summary

Neutral

Moving Avg:

Buy (6)

Sell (6)

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Buy (5)

Sell (3)

Siemens AG Class N

142.26

-6.50 (-4.37%)

Summary

Sell

Moving Avg:

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Sell (9)

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Sell (5)

Deutsche Bank AG

10.230

-0.850 (-7.67%)

Summary

↑ Sell

Moving Avg:

Buy (0)

Sell (12)

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Buy (2)

Sell (5)

 EUR/USD1.1725Sell
 GBP/USD1.3657↑ Sell
 USD/JPY109.39↑ Sell
 AUD/USD0.7254↑ Sell
 USD/CAD1.2815Buy
 EUR/JPY128.26↑ Sell
 EUR/CHF1.0879↑ Sell
 Gold1,764.95↑ Buy
 Silver22.253↑ Sell
 Copper4.1270↑ Sell
 Crude Oil WTI70.44↑ Sell
 Brent Oil74.24↑ Buy
 Natural Gas4.946↑ Buy
 US Coffee C182.30↑ Sell
 Euro Stoxx 504,043.63↑ Sell
 S&P 5004,357.73↑ Buy
 DAX15,132.06↑ Buy
 FTSE 1006,903.91Neutral
 Hang Seng24,099.14↑ Buy
 Small Cap 20002,178.78↑ Buy
 IBEX 358,655.40↑ Sell
 BASF61.660↑ Buy
 Bayer45.23↑ Sell
 Allianz183.86↑ Buy
 Adidas280.52Neutral
 Lufthansa8.664Neutral
 Siemens AG142.26Sell
 Deutsche Bank AG10.230↑ Sell
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,650/ 5,700
(0/ 0) # 856
SJC HCM5,615/ 5,680
(0/ 0) # 836
SJC Hanoi5,615/ 5,682
(0/ 0) # 838
SJC Danang5,615/ 5,682
(0/ 0) # 838
SJC Nhatrang5,615/ 5,682
(0/ 0) # 838
SJC Cantho5,615/ 5,682
(0/ 0) # 838
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KRW16,5320,13
Cập nhật lúc 06:14:09 21/09/2021
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