NetApp Stokes Competitive Fires

NetApp is planning some sweeping product changes, particularly in clustering, as the vendor goes on the offensive against rival Isilon, execs said at an analyst meeting today.

NetApp promised enhancements to the vendor's Decru security technology, virtual tape, and its GX clustering software during 2007. (See NetApp's GX Targets HPC.) "You will see new extensions to these technologies," said CEO Dan Warmenhoven during today's call, without offering much in the way of specifics.

The CEO was more forthcoming on the topic of Isilon, which has been trash-talking EMC and NetApp, accusing them of failing to make inroads into clustered NAS. (See Isilon's Counting on Clusters, Isilon Reports Earnings, and The Slings & Arrows of IPOs.) "They made some comments about NetApp during their recent IPO roadshow, [and] to be perfectly honest they pissed us off," said an agitated Warmenhoven, in response to a question from an analyst.

A financial analyst, who asked not to be named, told Byte and Switch that NetApp has likely been feeling the heat from its own financial backers. "Warmenhoven has probably had to address Isilon's remarks day in day out with investors," he said. "These things don't usually get addressed like that in a public forum -- that shows how angry he is," added the analyst.

Another NetApp exec at the meeting was a little more circumspect but promised that Isilon will have a fight on its hands. The clustering space, he admitted, had not been an area of "intense focus" for NetApp, although this situation has changed. "We're not going to let [Isilon] participate in that market by themselves any more -- they are going to have to play defense."The NetApp CEO said that the firm will also be making an aggressive push into large enterprises. "We're going to focus this year on new account acquisition," said Warmenhoven. "We have created a list of what we think are the 5,000 largest users of storage -- less than half of them are currently NetApp customers."

Execs on this morning's call explained that they will use their services business and their OEM deal with IBM to build awareness amongst these larger firms. "When you look at our recruitment, our professional services organization is the fastest growing organization within the company," said one exec.

A financial analyst told Byte and Switch that NetApp has not had as much traction in the enterprise space as it would like, hence this aggressive marketing push. "You have got to penetrate enterprise accounts - they are doing that, but slowly," he said.

On the security side, company founder Dave Hitz promised that NetApp's recently launched Protection Manager software, which lets IT managers define security policies, will also be beefed up in the area of backup. "We haven't got to the point where it is integrated with SnapManager and SnapManager for Oracle -- that's the next step."

Warmenhoven also hinted that NetApp is looking to tie its storage products to Web-based search technologies. "Our view is that the technologies that were largely developed for the Internet, the Google search engines and the like, have a lot of applicability in this area."A number of storage vendors, particularly in the data classification space, have already forged deals with Google in an attempt to boost CIOs' ability to find and manage stored information. (See Content Classifiers Glom Onto Google, Mathon Joins Google, and Scentric Joins Google.)

At least one analyst foresees strong growth for NetApp during the coming months. "We see plenty of runway for NetApp to show above 30 percent growth driven by its high end FAS 6000, its IBM channel, and Decru," said Goldman Sachs analyst Laura Congiliaro in a note yesterday. Wall Street estimates, she added, had predicted NetApp's growth to decelerate to 28 percent from its recent high of over 35 percent.

Speaking on this morning's call, NetApp CFO Steve Gomo predicted revenue growth of between 28 and 30 percent and non-GAAP EPS of between $1.38 and $1.41 for this financial year.

In another analyst note earlier this week, research firm A.G. Edwards speculated that NetApp would provide an update on its forthcoming low-end SAS system at its analyst meeting today, although execs did not talk about the technology during this morning's session.

Execs likewise did not touch on when NetApp plans to offer "full CDP" on its NAS systems. NetApp, along with rivals HDS and EMC, has dragged its feet in this area. (See HDS Hitches Commvault's CDP, EMC Takes CDP Downmarket , and New Wave of CDP Rolls In.)NetApp, for its part, acquired CDP technology when it bought Alacritus in 2005 but hasn't yet rolled out a full CDP product, although it does support snapshots on its NAS systems. (See NetApp Annexes Alacritus.)

Execs on this morning's call instead focused their attention on NetApp's recent acquisition of Topio, which lets users replicate data across different vendors' storage systems. (See NetApp Completes Topio Buy, Shopping Site Braces for Holidays, and NetApp Pockets Topio.)

This will give the vendor a crucial foot in the door with large enterprises, said Jay Kidd, senior vice president of NetApp's emerging products division. "The real opportunity there is to get more and more hooks onto primary locations and replicate that onto our secondary platform," he said. "With Topio, we're just getting started," he added, explaining that NetApp has already had some "significant wins" with European financial firms thanks to a partnership with IBM Global Services.

The market was not exactly overwhelmed by NetApp's message. In trading today, the vendor's shares fell $1.62 (4.24 percent) to $36.61.

— James Rogers, Senior Editor Byte and Switch