NetApp hits a home run in Q1

August 18, 2010 – NetApp reported its fiscal first quarter 2011 results today, narrowly exceeding financial analysts’ expectations. But who cares about expectations? Let’s look at the (impressive) raw numbers.

For the quarter, NetApp (NASDAQ: NTAP) raked in revenue of $1.14 billion, which is a 36% increase over the same quarter a year ago ($838 million), although a 3% drop vs. the previous quarter.

GAAP net income was $142 million, vs. $52 million a year ago, while non-GAAP income was $183 million, vs. $76 million a year ago.

“With total revenue growth for the quarter of 36% and product revenue growth of 51% year over year, NetApp has begun our fiscal year with great momentum,” understated president and CEO Tom Georgens.

Company officials followed that up with predictions of $1.16 billion to $1.21 billion in revenue for the next quarter.

Highlights
The biggest growth in revenue came from hardware (which NetApp refers to as “product” revenue): At $720.8 million for the quarter, that’s a 51% increase over the same period a year ago (although down 5% sequentially). Total systems shipped increased 78% over the previous year’s quarter, with nice numbers across all segments, including entry-level (+107%), midrange (+37%) and enterprise (+102%).

The only negative I noticed was a 38% quarter-to-quarter decline in shipments of NetApp’s V-series systems, although shipments of that product line increased 42% year-over-year.

On the software revenue front (which NetApp refers to as “software entitlement & maintenance revenue”), the company pulled in $174.7 million – an increase of only 6% year-over-year and 0.5% sequentially. Hey, what do you expect when a market leader in a particular technology – data deduplication – gives it away for free? But software is the area that I would expect NetApp to improve on going forward.

Services revenue came in at $242.3 million, up 25% year-over-year and 1% sequentially.

(You may be noticing that NetApp’s quarter-to-quarter performance was not nearly as astounding as its year-over-year performance, but that’s in part because it’s previous quarter was, in fact, astounding: see “NetApp wows Wall Street, doubles quarterly profits.”

More fun facts
NTAP's gross margin in its first quarter was 64.5% (on a non-GAAP basis), while operating margin was 18.8%.

And what would any write-up on NetApp be without some fun facts on data deduplication? The company claims to have achieved “more than an exabyte of storage with deduped storage-system deployments” (which doesn’t really make sense to me) and to have “deployed more than 87,000 deduped storage systems” (again, does that mean systems with dedupe functionality baked in, or, systems that are actually using the dedupe functionality?)

But here’s the really interesting number in my opinion: NTAP's balance sheet shows $2.61 billion in cash. In light of recent acquisitions (Dell-3PAR, Dell-Ocarina, IBM-Storwize, etc.), you just have to wonder who NetApp is going to buy.

As I’ve speculated before (without an iota of knowledge in the matter), Permabit might be a palatable morsel, but maybe I’m just drunk on the dedupe juice.

Look for some acquisition speculation in my next post.

Related blog posts:
EMC breaks Q2 revenue record
Earnings recap: ELX, QLGC, CVLT, SYMC, PAR, CML, STEC, HDS
Top 10 storage acquisitions of 2010

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posted by: Dave Simpson

Dave Simpson, Editor-in-Chief
by Dave Simpson
Editor-in-Chief

Dave Simpson has been the Editor-in-Chief of InfoStor since its inception in 1997. He previously held editorial positions at publications such as Datamation, Systems Integration, and Digital News and Review. He can be contacted at dsimpson@quinstreet.com

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