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(Reuters) - Data storage equipment maker NetApp Inc (NTAP.O) forecast current-quarter results largely below expectations, sending its shares down 4 percent in extended trading.
The company forecast second-quarter adjusted earnings of 60 to 65 cents per share, while analysts on average were looking for 63 cents.
The company expects revenue to be between $1.56 billion and $1.66 billion, largely below the $1.63 billion Wall Street had estimated according to Thomson Reuters I/B/E/S.
The company typically sees higher sales in its second quarter due to an increase in government spending closer to September, the end of the federal government's fiscal year.
However, Craig Hallum analyst Rajesh Ghai said NetApp may not be expecting the same level of pick up in government spending as in previous years.
"The U.S. federal government is going through a sequestration, and there is a possibility that it may not spend as much on IT this federal quarter. So that is weighing on their guidance," he said.
Automatic federal spending cuts known as sequestration began earlier this year when Congress failed to agree on an alternative deficit reduction plan.
Rival EMC Corp EMC.N said last month it expected higher revenue at its VMware (VMW.N) software unit in the second half due to an anticipated pickup in federal government demand and enterprise deals.
The company sells more than 80 percent of its products indirectly through value-added resellers, systems integrators, distributors, original equipment manufacturers (OEMs) and strategic business partners.
In the first quarter, NetApp reported a sharp fall in sales to OEM customers, who account for about 12 percent of the company's revenue.
Overall revenue rose 5.5 percent to $1.52 billion in the first quarter, but narrowly missed the $1.53 billion analysts had estimated.
"We expected our OEM revenue to be down in Q1 and it is down 20 percent," NetApp Chief Financial Executive Nick Noviello said. "We expect it is going to be down in Q2."
Excluding one-time items, the company earned 53 cents per share, 4 cents more than the average analyst estimate.
Profit rose to $81.6 million, or 23 cents per share, from $63.8 million, or 17 cents per share, a year earlier.
Analysts said NetApp benefited from the release of its Ontap 8.2 storage operating system in June and a delay in the launch of a new version of EMC's mid-range storage product.
The company, under pressure from activist shareholder Elliott Management, said in May it would spend about $1 billion in the next four months to buy back shares.
It said it had bought back $850 million of shares in the quarter and paid out $50 million in dividends.
Shares of the Sunnyvale, California-based company closed at $42.33 on the Nasdaq on Wednesday.
Reporting by Sruthi Ramakrishnan and Lehar Maan in Bangalore; Editing by Joyjeet Das; Sreejiraj Eluvangal