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NetApp Revs Up, Maybe Peaking

Driven by strong demand for data protection and iSCSI, Network Appliance Inc. (Nasdaq: NTAP) reported stronger sales than expected last quarter but hinted things might slow down this quarter as competition stiffens.

NetApps revenues of $413 million were up 39 percent from last year and 10 percent from last quarter. Its net income of $62.8 million, or $0.16 earnings per share (EPS), rose 57 percent from $40.1 million and $0.11 last year. Analysts’ estimates were for $407 million in revenue and $0.16 EPS, according to Thomson First Call.

However, NetApp’s guidance for this quarter is below what analysts expected. CEO Dan Warmenhoven forecasts revenue growth of 6 percent to 9 percent sequentially, which translates to revenue between $438 million and $450 million. Analysts were expecting guidance of just over $451 million. NetApp’s guidance of $0.16 EPS was also a penny below expectations.

Warmenhoven said the guidance would give NetApp a 36 percent to 36 percent revenue increase for its fiscal year earnings over last year, but investors were unimpressed. NetApp’s stock price dropped 12 percent in after-hour trading, falling $4.11 to $30.25.

The lower guidance comes as NetApp faces increased competition from rival EMC Corp. (NYSE: EMC) on the NAS front due to a new partnership with Cisco Systems Inc. (Nasdaq: CSCO) and an expected one with Dell Inc. (Nasdaq: DELL), plus an EMC/Dell rollout of iSCSI SAN systems (see Dell & EMC May Do NAS, Cisco & EMC Close NAS Deal, and EMC Mounts iSCSI Blitz).

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