"Our sources tell us that large customers are being told that supply chain constraints with third-party partners make it impossible for Cisco to ship orders this quarter, as sales have ramped faster than expected," [JMP Securities analyst Samuel Wilson] said in a note.
Wedbush analyst Matthew Robison said the company has faced intermittent shortages for a range of electromechanical components such as semiconductors and connectors. "My sense is that it's one thing one week, and another thing another week," he said in a phone interview. "The whole food chain wasn't ready for the demand that's been seen lately."
The article makes several references to this being a sign of increased IT spending by CIOs, including this comment from the Wedbush firm based on a recent survey of IT managers:
Wedbush said Cisco is bound to post strong growth based on these trends "because of strong cyclical implications and because the increasing priority of collaboration, cloud computing and virtualization imply the efforts by Cisco to expand into new product categories, including server computers, and channels that target virtualization and cloud computing increasingly appear to anticipate the market in both direction and timing."
And a third analyst firm echoed those findings, MarketWatch.com said:
In a research note this week, Deutsche Bank analyst Brian Modoff pointed to "solid sales trends for [Cisco's] datacenter switches, video/web collaboration, and carrier routing gear."
"For 2010, we see positive momentum for sales of their newly launched switching, video, and routing products, driven by high-priority IT initiatives," Modoff wrote.
And while product shortages and backlogs are clearly a problem, they're a pretty darned attractive problem relative to what most companies have been dealing with for the past 18-24 months. A Cisco spokesman told MarketWatch.com that some of its suppliers had cut back on their workforces so severely during the downturn that they are still trying to catch up to fill rising orders from Cisco and others:
Cisco spokesman John Earnhardt acknowledged the supply chain issues, saying the company is striving "to build upon our strong relationships with our suppliers to proactively manage our supply chain and minimize any potential impact to our customers. Similar to what is happening in the industry we are seeing some product lead time extensions stemming from supplier constraints based upon their labor and other actions taken during the downturn," he said in an e-mail.