NetApp's strong outlook eases Europe concerns

Wed Aug 15, 2012 6:26pm EDT

(Reuters) - Data storage equipment maker NetApp Inc (NTAP.O) forecast a strong second quarter despite lingering concerns over increased competition and continued slowdown in Europe, one of its key markets.

Shares of the company rose 5.4 percent to $33.49 in extended trade on the forecast that was mostly above analysts' expectations. The stock has shed more than 30 percent of its value in the last six months.

The company has been losing market share in the last few quarters to rival EMC, even as IBM Corp (IBM.N) and Hewlett-Packard Inc (HPQ.N) step up their efforts in the market.

"I think it's a relief rally, given that the outlook wasn't as bad as expected and profit was a beat on certain operating expenses cuts," ThinkEquity analyst Rajesh Ghai said.

The growing popularity of mobile gadgets like Apple's iPhone, which access remote computing power and data over the Internet, has fueled demand for storage products.

But NetApp's growth has been hit this year by weak spending by U.S. military and intelligence agencies, which are major customers.

A third of NetApp's sales comes from Europe, where a debt crisis has shaken confidence in the economy.

Chief Executive Tom Georgens said while there is still uncertainty over government and corporate spending in both Europe and the United States, sales in Asia are expected to continue to grow.

NetApp first warned of slowing Europe sales in May and since then since then, EMC, IBM and HP have all flagged weakness, hinting that corporate and government IT spending is set to take a backseat.

ASIA TO DRIVE GROWTH

Georgens said Asia-Pacific remained a bright spot with a 9 percent year-over-year revenue growth in the first quarter, when sales in both EMEA and the Americas slipped.

The company expects second-quarter profit of between 45 cents and 50 cents on revenue of $1.5 billion to $1.6 billion.

Analysts on average were expecting a profit of 46 cent a share on revenue of $1.54 billion, according to Thomson Reuters I/B/E/S.

First-quarter profit fell to $64 million, or 17 cents a share from $140 million, or 34 cents a share last year.

Revenue fell slightly to $1.45 billion.

Excluding one-time items, the company reported a profit of 42 cents a share.

Analysts were looking for a profit of 38 cent a share on revenue of $1.46 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Himank Sharma in Bangalore; Editing by Saumyadeb Chakrabarty)