(Adds CEO and analyst comments)
By Soham Chatterjee and Lehar Maan
Aug 13 NetApp Inc reported
better-than-expected first-quarter profit as businesses spent
more to replace their ageing storage equipment.
The company's shares rose as much as 3 percent after the
Increased sales of products sold under the NetApp brand
assuaged some investors' concerns that the company was losing
business to newer and cheaper flash-based storage technology
vendors such as Nimble Storage Inc and Pure Storage.
"What's different (this quarter) overall is we got some
rebound in enterprise spending in our larger U.S.-based
accounts," Chief Executive Tom Georgens told Reuters. "We saw a
much larger number of $1 million-plus transactions this quarter
than we saw in Q1 a year ago."
NetApp and larger rival EMC Corp are trying to boost
growth by focusing on products such as flash-based storage and
software-based technologies as businesses cut spending on
high-end storage products for cheaper alternatives.
EMC last month reported better-than-expected revenue helped
by higher sales of newer flash storage products.
Analysts expect NetApp to benefit from the launch of its
flash-based storage system, FlashRay, in late 2014.
NetApp has overhauled its Data Ontap operating system, which
protects and manages data at both its customers' data centers
and cloud vendors such as Amazon.com Inc, to drive
Revenue from NetApp's branded product business, which
accounts for 91 percent of total sales, rose 0.7 percent in the
quarter ended July 25.
"Branded revenue is going to continue improving on a
year-over-year trajectory and I think a lot of investors were
doubtful to whether or not that would happen," Technology
Insights Research analyst Nehal Chokshi told Reuters.
NetApp said it expects current-quarter adjusted profit of
66-71 cents per share on revenue of $1.49-$1.59 billion.
Analysts were expecting second-quarter adjusted profit of 69
cents per share on revenue of $1.53 billion, according to
Thomson Reuters I/B/E/S.
In the first quarter, adjusted profit rose 13 percent to 60
cents per share, beating analysts' average estimate of 57 cents
Revenue fell about 2 percent to $1.49 billion, but topped
the average Wall Street estimate of $1.47 billion.
Adjusted gross margin rose to 64.3 percent from 61.3 percent
a year earlier.
"Their service gross margin came in quite a bit better than
they had guided for," Piper Jaffray analyst Andrew Nowinski told
Reuters, adding that he viewed NetApp's outlook as lightly
NetApp also said it would pay a dividend of $0.165 per share
on Oct. 22.
NetApp's shares were marginally up at $39.43 after the bell.
(Additional reporting by Lehar Maan; Editing by Saumyadeb
Chakrabarty and Feroze Jamal)