NetApp forecast disappoints, shares fall

By Scott Hillis

SAN FRANCISCO (Reuters) - U.S. data storage equipment maker NetApp Inc (NTAP.O: Quote, Profile, Research, Stock Buzz) posted a higher quarterly profit on Wednesday, but gave earnings and revenue forecasts lower than Wall Street expected, and its shares fell 10 percent.

NetApp said it expected to earn between 20 and 23 cents per share, excluding special items, on revenue between $845 million and $875 million in its current fiscal first quarter.

That was below analysts' average forecasts of earnings of 27 cents a share and revenue of $868 million, according to Reuters Estimates.

NetApp shares fell 10.8 percent to $23 after closing at $25.79 on Nasdaq, down 2 percent during the trading day.

"People are concerned about macro headwinds. Revenue guidance is lower and yet they're going to spend a lot more money," said Jefferies & Co analyst Bill Choi. Other analysts pointed to the company's plan to increase headcount.

Executives told analysts during a conference call that NetApp would add 500 to 600 employees in this quarter, on top of 522 new hires in the third quarter, as it looks to bolster its sales force. NetApp ended the quarter with 7,645 workers.

Storage rival EMC (EMC.N: Quote, Profile, Research, Stock Buzz) also talked about boosting sales efforts last month saying it needed more market share in order to make its numbers due to the tough U.S. economy even as it posted strong revenue growth.

But Shebly Seyrafi, a managing director Caris & Co said NetApp appeared to have lost market share to Hewlett-Packard Co (HPQ.N: Quote, Profile, Research, Stock Buzz) rather than EMC in the quarter just reported.