$655 Million Memory glitch hits Cisco’s Q2 bottom-line

Earnings impacted by faulty DRAM chips; Micron’s name pops up as the supplier

Cisco’s earnings for the second quarter of fiscal 2014 were impacted by a $655 million charge to fix faulty memory components in a range of products. The buggy memory products were manunfactured by a single supplier between 2005 and 2010, Cisco said during its Q2 earnings conference call this week.

Micron Technology’s name surfaced this week as the alleged supplier of the faulty DRAM chips.

+MORE ON NETWORK WORLD: Cisco’s Q1 issues carry over into Q2+

The components have been determined to have the potential to fail due to a design or manufacturing defect, Cisco CFO Frank Calderoni said during the call.

These are widely used across the industry and are included in the number of Cisco’s products. Although the majority of these products are beyond Cisco’s warranty terms and the failure rates are low, Cisco is proactively working with customers on mitigation.

Cisco believes the impact of the memory component fix and its expenses will not be a recurring event. Said Calderoni:

Cisco does not believe it is reflective of ongoing business and operating results.

But CEO John Chambers told the Wall Street Journal that others in the networking industry may also be affected by it. Micron said it is expecting other incidents to possibly arise.

By Jim Duffy