Cisco reserves $125 million to pay for faulty clock component in switches, routers

In its quarterly financial results announcement this week, Cisco said it had set aside $125 million to help cover the cost of replacing networking gear impacted by a fatal clock component.

Cisco was the first vendor to post a notice about the clock technology problem earlier this month saying the fatal glitch includes some of the company’s most widely deployed products, such as certain models of its Series 4000 Integrated Services Routers, Nexus 9000 Series switches, ASA security devices and Meraki Cloud Managed Switches. Clock components are critical to the synchronization device functions.

+More on Network World: Cisco: Faulty clock part could cause failure in some Nexus switches, ISR routers, ASA security appliances+

Cisco wrote: “In some units, we have seen the clock signal component degrade over time. Although the Cisco products with this component are currently performing normally, we expect product failures to increase over the years, beginning after the unit has been in operation for approximately 18 months. Once the component has failed, the system will stop functioning, will not boot, and is not recoverable.

To support our customers and partners, Cisco will proactively provide replacement products under warranty or covered by any valid services contract dated as of November 16, 2016, which have this component.”

In questioning during its fiscal second-quarter earnings call this week, financial analysts wondered about how the faulty clock component might impact revenue or earnings. Cisco CFO Kelly Kramer stated: “We have had an issue from a supplier come out, and we did book a reserve for $125 million, you can see in our [generally accepted accounting principles (GAAP)] results and in the press release, to cover that. We always, and continue to stand by our customers through any situations like this. This is very proactive. This is a failure rate that will happen over time, but we’re working with our customers to work through that. So we’re not anticipating any impact from that from a top line perspective…Again, we’re working very proactively with our customers and in terms of how quickly and where they want to do their replacement. So we’re working very, very closely, but as of right now we have not seen and don’t anticipate any massive revenue impact from this.”

[For a full transcript of the analysts call check out Seeking Alpha’s copy here]

Cisco is not the only vendor facing the clock problem. Hewlett Packard Enterprise most recently acknowledged the issue stating: “To the best of our knowledge, our customers are not experiencing failures due to the Intel C2000 chip, which is deployed on a limited number of our products. We remain committed to assuring the highest quality experience from our solutions and are proactively working with Intel to mitigate any future risk and impact on our customers.”

Juniper this week said that it “is aware of an issue related to a component manufactured by a supplier which impacts a limited set of our product line. We are currently working directly with any impacted customers on a swift solution.”

+More on Network World: Juniper facing fatal clock flaw that impacts Cisco routers, switches+

A Juniper Technical Service Bulletin posted on Reddit’s Networking subReddit site this week, stated: “Although we believe the Juniper products with this component are performing normally as of February 13, 2017 the [listed] Juniper products could after the product has been in operation for at least 18 months begin to exhibit symptoms such as the inability to boot, or cease to operate. Recovery in the field is not possible. Juniper product with this supplier’s component were first placed into service on January 2016. Juniper is working with the component supplier to implement a remediation. In addition, Juniper’s spare parts depots will be purged and updated with remediated products.”

The products in the warning comprise 13 Juniper switches, routers and other products including the MPC7E 10G, MPC7E (multi rate), MX2K-MPC8E, EX 920 Ethernet switches and PTX3000 integrated photonic line card.

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