The entertainer formerly known as F5 Networks – it switched to the old F5 in November – is cutting its FY22 revenue forecast from $30 million to $90 million because it can’t source enough specialized chips to produce systems.
The continued impact of the shortfall was described in F5’s first quarter results through December 31 and the subsequent earnings conference call, during which Chief Executive Francois Locoh-Donou spoke open to the challenge of suppliers canceling orders because they cannot meet demand.
“Due to continued strong demand for systems, our systems backlog continued to grow in the first quarter,” he said. “Over the past 30 days, vendors of critical components that cover a number of our platforms have notified us of significant increases in clearances.
“These manifested themselves both in the form of order delivery delays and a sudden and pronounced reduction in quantities shipped. The gradual decline in component availability is severely limiting our ability to meet the continued high demand of our customers for our systems.
“Like others in the industry, we are seeing worsening availability of specialty network chipsets. In the past 30 days, we have learned that shipments for 52 week lead time components or there is a year have been pushed back and our planned quantities have been reduced.”
Group revenue increased 10% year-on-year to $687 million in the first quarter of F5, fueled by software up 47% to $163 million, services up 2% to $344 million dollars and 1% of hardware to $180 million.
“Our software transition continues to gain momentum,” Locoh-Donou said, adding later in the earnings call: “While we are only disappointed that supply chain challenges have limited our ability to meeting customer demand for short-term systems, we are more confident than ever in our long-term position, strategy and opportunity.”
The backlog was up 10%, so the sales pipeline looks healthy, said the executive, who went to great lengths throughout the call to tell analysts: “It’s absolutely a supply issue. And the revision we just made to our annual guidance is 100% related to the supply issue.”
For the year, F5 now expects sales growth of 4-8% ($610-650 million).
“The problem with our supply chain has steadily deteriorated. And last year we were unable to ship the demand, that’s why our backlog grew so much over the last year. ‘year.
“Things got worse. And early in our fiscal year, when we were planning for this year, we actually factored in the number of opt-outs we were getting from various vendors and a situation that was already very tight on a number of components.”
He said over the past month there have been over 400 supplier cancellations, “and we had about 30% less than that just a month ago – the situation is completely unprecedented.”
In a bid to improve the supply situation, F5 said it is working to design and qualify spare parts – which could improve the situation in the second half. He is also trying to pre-order more components.
F5 is confident that he won’t see canceled orders. “The demand that we have is very real. Our lead times, unfortunately, have gradually deteriorated over the last five or six quarters, but we haven’t seen any increase in order cancellations, and we don’t expect to see that. in the future,” Locoh-Donou said.
Supply chain issues with silicon components have plagued companies in IT and beyond for several quarters now, and network vendors are no less vulnerable.
Last year, Arista warned that delivery times for key chips were stretching to 60 weeks, double what could be expected before the pandemic. Both Arista and Juniper announced they were forced to raise prices in November, while Cisco warned its buyers and investors that supply chain problems would likely persist for several more months, although it expected to some improvement in the situation for the third and fourth quarters. , taking us into the second half of 2022. ®