UPDATE: NetApp Sales Hurt By Economic Factors, Names New Financial Chief
August 17 2011 - 6:16PM
Dow Jones News
Storage maker NetApp Inc. (NTAP) said Wednesday the weak U.S.
economy weighed on its federal and financial services businesses,
cutting into the company's fiscal first-quarter revenue growth and
second-quarter guidance.
Separately, NetApp said Chief Financial Officer Steve Gomo will
retire at the end of the year and be replaced by Nicholas R.
Noviello, senior vice president of finance and global controller.
Gomo, 59 years old, joined NetApp in 2002. The company said the
change resulted from a planned management succession.
The Sunnyvale, Calif., company has benefited from the growing
need for space to store data at businesses and organizations, but
competition is intensifying as tech giants scoop up smaller players
and gain a stronger foothold in the market. Now, macroeconomic
worries are causing customers to be more cautious with
spending.
President and Chief Executive Tom Georgens said in an interview
that while NetApp entered the fiscal first quarter "really strong,"
macroeconomic conditions hurt its U.S. federal and financial
services businesses in July.
"International stayed very strong, but federal just couldn't
catch up," Georgens said. "And financial services is a bit more
cautious."
He added that while the environment remains uncertain, NetApp
still is maintaining its bullish guidance for the year.
"We are not anywhere close to giving up or punting our yearly
guidance," Georgens said.
Shares, down 24% in the year-to-date through Wednesday's close,
slumped 12% to $36.80 in after-hours trading.
The move to cloud computing and virtualization, which makes data
centers more efficient by running multiple computers' operations on
a single server, has helped NetApp post one of the strongest growth
rates in the tech industry and take share from rivals. But it has
experienced some hiccups of late, with results hurt by component
shortages in the latter half of the previous fiscal year.
Earlier this calendar year, the company bought LSI Corp.'s (LSI)
external storage systems business, Engenio, for $480 million to
broaden its offering of high-end products and expand customer
base.
Georgens said Engenio performed "quite well" in the first
quarter, better than the company had anticipated.
For the quarter ended July 29, NetApp posted a profit of $139.5
million, or 34 cents a share, down from $150.7 million, or 40 cents
a share, a year earlier. Excluding stock-based compensation and
other impacts, per-share earnings rose to 55 cents from 51 cents.
Revenue grew 26% to $1.46 billion.
NetApp's May guidance projected a bullish profit between 52
cents and 57 cents a share with revenue of $1.46 billion to $1.55
billion.
Gross margin narrowed to 61.5% from 64%.
Product sales jumped 31%, while revenue from the much-smaller
software and service segments increased 14% and 22%,
respectively.
NetApp also projected a second-quarter profit of 58 cents to 62
cents a share and revenue of $1.5 billion to $1.6 billion. Analysts
polled by Thomson Reuters, on average, expected earnings of 60
cents a share on revenue of $1.61 billion.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
(Drew Fitzgerald contributed to this report.)
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