NetApp Insiders Net Big Bucks

A rising stock has been good to Network Appliance Inc. (Nasdaq: NTAP) shareholders -- which includes company executives.

A group of 11 NetApp insiders sold off 3.23 million shares last quarter, reaping a total of $105 million in gross profits, according to information from research company Thomson Financial. When factoring out the 2.74 million shares exercised from stock options, the execs pulled in $75 million.

"That's still very substantial in terms of profit-taking," says Kevin Schwenger, research analyst at Thomson. "That's about three times what we normally see for this company."

President Thomas Mendoza led the charge by unloading 1,825,623 shares for $60,451,469, followed by CEO Daniel Warmenhoven with 275,000 shares ($8,900,175), EVP Jeffry Allen with 200,000 shares ($6,566,400), and founder/EVP James Lau with 140,723 shares ($4,750,571). Six others sold more than $1 million worth of stock, including founder/EVP David Hitz and CFO Steve Gomo.

NetApp insider selling for the quarter easily led storage vendors. EMC Corp. (NYSE: EMC), for example, saw eight top-level employees sell $22 million worth of stock for the same period, according to Thomson figures.However, the moves might not foreshadow any unusual trends with the company. With its stock trading at nearly a four-year high, NetApp execs might simply have awarded themselves a holiday bonus. Relatively low base salaries might also provide an explanation (see 2004 Top Ten: CEO Payouts).

"You can't discount this level of selling, but it's probably just something to watch for the first quarter," says Schwenger. "You'll want to see if they're still selling or tapering off."

NetApp's last big sell-off occurred around its previous peak a little more than four years ago. In the third quarter of 2000, NetApp insiders sold $160 million worth of stock. In the fourth quarter, the stock price peaked at $148.62 on Oct. 20. In trading late today, NetApp shares were $31.13, down $0.32 (1.02%).

Brett Mendel, Senior Analyst, Byte and Switch Insider