NetApp Grows Like Weed

Double-digit growth will continue through 2005, execs claim

May 19, 2004

2 Min Read
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Network Appliance Inc. (Nasdaq: NTAP) had a "blow out" quarter, according to CEO Dan Warmenhoven, and he expects the company to grow significantly this year and in 2005.

NetApp reported fourth-quarter revenues of $337 million, up 39.5 percent year over year and 13 percent sequentially. Pro forma net income for the quarter was $42.5 million, or 12 cents per share, an increase of 71 percent year over year. For the full year, revenues were $1.17 billion, up 31 percent from the prior fiscal year.

Growth was strong across all segments and regions, execs said on a conference call with analysts after the market closed. They attribute the success to a focus on partner programs that enable the company's products to go deeper into enterprises. In particular, arrangements with Oracle Corp. (Nasdaq: ORCL) and Veritas Software Corp. (Nasdaq: VRTS) are giving NetApp the means to get into the "right" customers and make bigger sales in a shorter amount of time, execs said.

NetApp's also looking to continue investing in services and marketing, especially to pitch prospects that its filing system isn't restricted to just one segment. Instead of looking at the storage networking market as high end, midrange, and low end, NetApp is viewing it as divided into mainframe storage, direct-attached storage replacement, and open systems storage networking. And the last segment, says Warmenhoven, is the one that's growing.

He claims NetApp's seen brisk sales of iSCSI products, which were 10 percent of bookings for the quarter, compared to one-third of bookings in Fibre Channel kit. Windows-based products for block storage also are on the upswing.NetApp's guiding investors to expect even better things ahead. The first quarter will show 4 percent to 6 percent growth, without any revenue expected from the company's acquisition of Spinnaker. EPS will be 12 cents to 13 cents per share. For the full year 2005, pro forma EPS will fall between 52 cents and 54 cents.

NetApp also anticipates adding at least 200 employees a quarter through 2005. This year, it managed to add 345 employees for a total of 2,844, execs say. And just 80 of those came from Spinnaker.

Great expectations have often been doused by market vagaries, but one thing is clear: NetApp is clearly onto something with its partnerships and its refusal to fit into a comfortable niche. It's worth watching to see whether it continues to hold.

Mary Jander, Site Editor, Byte and Switch

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