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Net App Announces Flat Q1, Layoffs: Page 2 of 2

"Business across all geographies is slow," Warmenhoven said. Though the company said it closed 475 new accounts during the past quarter, the new deals were generally smaller in size than similar contracts signed in the past, leading Net App to remain conservative in its predictions.

"Our customers finally have budgets they can trust, but we're not ready to call it a trend, or a rebound to IT spending," Warmenhoven said of the new contracts. Net App also said it will take a restructuring charge in the range of $6 million to $8 million during the second quarter, related to the layoffs, which the company said will be completed by the end of the next fiscal period.

Though the company wanted to blame the economic slowdown for most of its shortcomings, Net App is also feeling more competitive pressure, from players like Hitachi Data Systems (HDS), which recently announced a cross-licensing deal with Sun Microsystems Inc. (Nasdaq: SUNW) (see Sun Shines on Hitachi). Warmenhoven said that Network Appliance will cut prices if necessary to keep from losing market share.

"We are not going to lose anything on price, and our sales force understands that," Warmenhoven said. Net App's stock closed Tuesday at $12.76 per share, down $1.23 on the day.

- Paul Kapustka, Editor at Large, Light Reading