Good luck upgrading your network any time in the next year or two: key vendors Arista and Juniper have both warned they're waiting up to 80 weeks – aka 560 days, taking us to some time in May 2023 – to get their hands on some components.
News of those very long lead times came to light in both vendors' recent earnings announcements and follows Cisco and HPE hiking prices due to industry-wide pandemic-related supply chain difficulties.
Juniper announced preliminary numbers last week. Q3 2021 revenue reached $1,188.8 million – up four points year over year. The company reported its order backlog is now over a billion dollars larger than it was at the end of FY2020.
Executive veep and CFO Ken Miller told investors that elevated supply chain costs "are hitting us now". The company has "purchase orders throughout all of next year. In some cases, out 50 weeks, in other cases, out 80 weeks, in an attempt to secure supply."
"We are expecting the supply chain costs to remain elevated throughout next year," Miller added. He did, however, offer some hope of price reductions "maybe late next year".
"But at this point, we're presuming that it's going to remain elevated on the cost side. On the pricing side, we are absolutely taking pricing actions to try to protect our gross margin. At this point, I feel that we are going to be able to protect much of our gross margins a little too early to call exactly how that's going to play out."
Juniper reported non-GAAP gross margin for the quarter of 60.1 per cent. And yes, protecting that figure means increasing the prices you pay.
If that makes you mad, know that if you have already ordered Juniper kit you could be part of the problem. Some of the backlog was sold at pre-pandemic component prices.
"We need to burn through the backlog at kind of legacy pricing," Miller said.
- Computacenter, one of Europe's largest resellers, struggling with data centre kit, up to 6-month lead times
- 'Totally driven by supply': Dell, HP talk of backlogs and shortages as big PC-makers turn in their numbers
- China reports local chipmaking boom with output up more than 40%
- China tightens distributor cap after local outfits hoard automotive silicon then charge silly prices
Arista announced its Q3 results on Monday. Revenue of $748.7 million represented a 23.7 per cent year on year increase.
President and CEO Jayshree Ullal told investors the firm's supply chain is very challenged.
"Lead times of many components have extended to 50 to 80 weeks with price hikes ranging from 15 per cent to as high as 200 per cent across our entire supply chain of copper, steel, substrate, printed circuit board, memory, silicon ICs, connectors, freight, and labor.
"Arista has been deliberate and thoughtful about price increases so far … but we have recently announced increased list prices effective November 4th, 2021, averaging approximately 10 per cent to offset the very high escalating costs," she added.
Arista still managed to achieve overall Q3 gross margin of 64.9 per cent.
The networking upstart calls hyperscalers "Cloud Titans". Whatever you call them, they were Arista's top market, ahead of enterprise sales, and plenty of customers started to splash for 400G switches, while mere 100G and 200G kit also sold well. Juniper also did well with hyperscalers, saw a big jump in sales of the Wi-Fi kit it acquired along with Mist in March 2019.
Both vendors forecast good days ahead, despite supply chain worries.
Arista has split its stock, which has risen in price from around $250 a year ago to just over $400 before the split announcements. Splits are usually a sign the company wants its scrip to be less intimidatingly priced for smaller investors. Arista's share price popped from $409 to $513 after the split was announced, suggesting investors see lots more growth that the lower price shares will attract. The company predicted Q4 sales of $775 million to $795 million, and for gross margins to hold in a range between 63 and 65 per cent.
Juniper predicted it will deliver "at least mid-single-digit revenue growth on a full year basis in 2022", Q4 revenue of $1,265 million, and gross margin of approximately 59.5 per cent. ®