Arista CEO details supply chain woes, mulls price hikes

Like its competitors in the past few days Arista Networks spent a lot of its financial analysts call this week detailing the impact of the ongoing supply chain problem and trying to find a light at the end of the tunnel.

Arista, like competitors Juniper and Extreme, says it is doing well financially—quarterly revenues up 31.4% to $877.1 million from $667.5 year-over-year, a record for the company. But the supply chain issues are getting worse, the company said.

Arista CEO and President Jayshree Ullal pointed to last-minute unavailability of parts (or what she called “decommittal of components”) from at least two unnamed suppliers that has hurt the company most recently.

“We have had decommits come literally the same week we are expecting the components,” Ullal said during the analyst call Monday. “They surprise us right when we’re looking to build a product so we end up having a lot of our contract manufacturing capacity waiting on key components.”

The only way to resolve these decomitts was to pay orders of magnitude extra to get the parts, Ulall said. “Sometimes we can get them and sometimes we couldn’t. So we believe this very constrained environment of components combined with decommit is going to continue.”

“Each part for each device has a separate story, and we’ve seen some suppliers that are trying to increase capacity, but don’t have access to equipment or they are waiting for orders that are also constrained by semiconductors. So the challenges are across the board and very specific to each device,” Ulall said.

Industrywide problem

The supply chain is causing a backlog of orders across the industry. Arista declined to define its backlog in the earnings call, but Arista stated earlier this year that some of the lead times on its sales are 50 to 70 weeks out. Cisco, which reports results next week, in its most recent disclosure said its current product backlog is nearly $14 billion. Extreme Networks said last week it’s total backlog is $425 million.

Juniper recently reported a “record level of more than $1.8 billion” in backlog orders and said it continues to experience “significant supply chain related headwinds” associated with elevated component freight and logistics costs, which are expected to continue throughout the year.

All of the network vendors have implemented price increases of one size or another, and while Arista so far has hiked prices once, last November, it is now contemplating another, Ulall said.

“We’ll look and see if we need to do another one and how sustained some of these cost increases are and then we’ll decide based on that,” Ulall said.

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