Network Appliance posts profit; sees margin falling

By Gina Keating

LOS ANGELES (Reuters) - Network Appliance Inc (NTAP.O: Quote, Profile, Research, Stock Buzz) gave a better-than-expected quarterly profit and outlook on Wednesday as demand from the U.S. government, Europe and Asia offset sluggish North American corporate spending.

Shares in the data storage equipment maker rose more than 12 percent on the results, but erased their gains after NetApp forecast a fall in margins as it adjusts prices and hires more employees to spur additional growth.

Fiscal second quarter net income was $83.8 million, or 23 cents per share, versus $86.9 million a year ago, or 22 cents per share based on a higher number of shares outstanding.

Excluding acquisition-related costs and other items, profit was 32 cents per share for the quarter ended October 26, topping the average analyst forecast of 26 cents, according to Reuters Estimates.

Revenue rose 21 percent to $792.2 million, compared to Wall Street expectations of $760.3 million.

"We ... felt the slowdown early, in fiscal Q1, but we actually saw a pretty good rebound around the world except for large accounts in North America, which are dominated by large financial services companies," Chief Executive Dan Warmenhoven told Reuters. "The global economy is very strong ... the weakness is concentrated in the financial services sector."

The Sunnyvale, California-based company forecast fiscal third-quarter revenue of $872 million to $883 million, well above the average analyst forecast of $854.9 million.

The company said it expects net earnings of 23 cents to 24 cents per share and adjusted earnings of 33 cents to 34 cents. Wall Street was looking for net earnings of 21 cents and an adjusted 32 cents per share, according to Reuters Estimates.