An illuminated logo sits outside the Cisco booth at ISE 2024 on January 30, 2024 in Barcelona, Spain.
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Cisco Systems Shares closed 12% lower on Thursday as rising memory prices squeezed the network company’s margins. It was the worst day for stock prices since 2022.
Strong demand for artificial intelligence data centers has created a global memory shortage and driven up component costs. Large orders for data center memory limit production capacity for other devices, including smartphones.
This is creating uncertainty for many technology companies, including consumer electronics manufacturers such as: apple and Dell Likewise, chip manufacturers QualcommWhen it issued weak guidance on February 4, it cited shortages as the reason. Now Cisco is feeling the pinch.
Cisco CEO Chuck Robbins addressed the rise in memory prices across the market during Wednesday’s earnings call. Robbins said Cisco will increase prices, revise contracts and negotiate terms to account for changes in component prices.
“When it comes to memory, we’re going to control what we can control,” Mark Patterson, Cisco’s finance chief, said on a conference call.
The company reported better-than-expected quarterly results on Wednesday, but shares fell about 7% after Cisco reported mediocre forecasts.
Product gross margin for the quarter was 66.4%, down 130 basis points year over year, “primarily due to the negative impact of higher mix and memory costs,” Patterson said.
