NetApp's revenue guidance light, shares -3.5% AH

NetApp (NTAP) expects FQ4 revenue of $1.62B-$1.72B and EPS of $0.77-$0.82. While the latter is in-line with an $0.80 consensus, the former is below a $1.73B consensus.

Though FQ3 revenue missed estimates, NetApp was able to beat EPS forecasts with the help of $507M worth of buybacks. From the looks of things, buybacks will also provide a lift to FQ4 EPS.

Product revenue (drives future maintenance/service revenue) -4% Y/Y to $10.015B. Software entitlements/maintenance revenue -1% to $227M, services +8% to $368M.

OEM revenue, hurt by partner IBM's weak storage sales, fell 23% Y/Y to $157.3M. NetApp-branded revenue rose 2% to $1.45B.

Gross margin rose 310 bps Y/Y to 63.5%. The triggers: A 400 bps improvement in product GM to 57.1%, and a mix shift towards software/services. Thanks to job cuts, sales/marketing spend fell 4% to $475.9M.

Rival EMC reported healthier storage sales last month, albeit while issuing soft guidance.

CC at 5:30PM ET. FQ3 results, PR.

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