NetApp Sales Up

Network Appliance Inc. (Nasdaq: NTAP) today credited its revenue increase last quarter to growth in data protection, iSCSI, and customers moving from attached to network storage (see NetApp Revenues Jump).

NetApp reported $375.2 million in revenue, up 36 percent from last year and 5 percent from last quarter. Income hit $58.4 million or $0.16 earnings per share, up 74 percent from last year and above its guidance and analysts expectations. According to Reuters, financial analysts expected NetApp revenue of $376.66 million and EPS of $0.14.

Although slightly missing Wall Street’s lofty revenue expectations, NetApp’s revenue growth eclipsed even that of its NAS rival EMC Corp. (NYSE: EMC), which last month reported revenue increases of 34 percent year-over-year and 3 percent sequentially (see Tucci Touts ILM).

NetApp CEO Dan Warmenhoven told analysts that NearStore disk backup revenue increased 20 percent from last quarter and 100 percent from last year, and made up 17 percent of the company’s revenue. He also said iSCSI received a boost from Windows-based customers and jumped significantly as customers shifted from DAS to networked storage. NetApp fabric-attached storage (FAS) systems that support Fibre Channel SANs, iSCSI SANs, and NAS also jumped and now make up 14 percent of NetApp’s product sales.

“Our SAN business is growing, and our NAS business continues to grow and take market share along with it,” Warmenhoven said. “As you can see, Network App is benefitting from the highest growth segments of the storage market. We believe data protection, Windows, and NAS are gaining momentum in the market place.”NetApp also saw a sharp change in the mix between direct and non-direct sales, as 55 percent of revenue last quarter came from non-direct sales and 45 percent from direct sales -- virtually reversing the numbers from the previous quarter (see Indirect Hits).

NetApp gave guidance for this quarter of EPS of $0.16 and an increase in revenue from 35 to 38 percent over last year and 7 to 9 percent from last quarter.

So how did NetApp beat estimates for EPS while falling below in revenue? Part of the reason comes from a 58 percent increase in professional services revenue and sharp growth in software revenues from last year, helping to bump up gross margin to 61.8 percent from 60.2 percent last quarter.

— Dave Raffo, Senior Editor, Byte and Switch