Cisco's GM beats guidance; product sales still slumping

|About: Cisco Systems, Inc. (CSCO)|By:, SA News Editor

Cisco's (CSCO) had an FQ3 gross margin of 62.7%, +140 bps Q/Q and -30 bps Y/Y, and above guidance of 61%-62%. That contributed to the quarter's EPS beat.

After falling 11% Y/Y in FQ2, Cisco's product revenue (76% of total revenue) fell 8% in FQ3 (share loss in multiple markets). Services revenue (heavily tied to past product sales) rose 3%, even with FQ2. Opex fell 2% Y/Y after falling 6% in FQ2.

$2B was spent on buybacks vs. $4B in FQ2. In spite of the sales weakness, free cash flow rose slightly Y/Y to $2.83B (exceeding net income of $2.6B). The deferred revenue balance is up 4% Y/Y to $13.2B.

Cisco now has $50.5B in cash/investments (much of it offshore), and $20.9B in debt.

CSCO +4.1% AH. CC at 4:30PM, guidance should be provided.

FQ3 results, PR