May 26, 2010 / 8:40 PM / 9 years ago

UPDATE 2-NetApp profit, outlook surpass Street estimates

* Q4 profit ex items 50 cts vs Street view 44 cts

* Q4 rev $1.17 bln vs Street view $1.09 bln

* Sees Q1 profit ex items 43-47 cts vs Street view 37 cts

* Sees Q1 rev $1.1 bln-$1.14 bln vs Street view $1.04 bln

* Shares rise 5.3 percent after hours

(Adds analyst comment, details on results, byline)

By Jim Finkle

BOSTON, May 26 (Reuters) - NetApp Inc (NTAP.O) reported quarterly earnings that beat Wall Street forecasts and issued a stronger-than-expected outlook, saying demand for its storage gear is rising as companies modernize aging data centers.

NetApp, along with rival EMC Corp EMC.N, is benefiting as businesses rush to buy storage equipment because of concerns their existing systems are at risk of running out of space. They held off from such purchases during the recession.

“Storage is doing very well right now,” said Wedbush Securities analyst Kaushik Roy.”

The results, which sent NetApp’s shares up 5.3 percent in after-market trade, came a week after technology giantHewlett-Packard Co (HPQ.N) reported stronger-than-expected earnings and raised its outlook for 2010. [ID:nN18164132].

Investors are watching both companies’ results to gauge the extent to which the rebound in corporate technology spending will be sustained through the course of the year, especially as NetApp and HP are among the few whose quarters extended through April.

Still, while HP’s overall business performed ahead of Wall Street estimates, its server sales grew more slowly than NetApp’s, suggesting that NetApp is gaining market share, Roy said.

NetApp reported profit, excluding items, of 50 cents per share in its fiscal fourth quarter, ended April 30, ahead of the average analyst forecast of 44 cents, according to Thomson Reuters I/B/E/S. Revenue rose 33 percent from a year earlier to $1.17 billion, beating the average forecast of $1.09 billion.

“An active technology refresh is going on. Infrastructures are as old as they have ever been,” Chief Executive Tom Georgens said in an interview.

The Sunnyvale, California-based company also forecast first-quarter profit, excluding items, of 43 cents to 47 cents per share, above the Wall Street view of 37 cents. It forecast quarterly revenue of $1.1 billion to $1.14 billion, ahead of the $1.04 billion average forecast.

Georgens said NetApp is benefiting from a surge in demand for virtualization software sold by VMware Inc (VMW.N), which reported results last month far above Wall Street projections.

VMware’s virtualization software allows one server to perform the work of multiple machines. NetApp has tweaked its storage equipment to work efficiently with those “virtual” machines and works with VMware to help businesses design data centers that use products from both companies.

NetApp shares rose to $34.15 in extended trading after closing at $32.43 in regular Nasdaq trade. (Reporting by Jim Finkle; Editing by Gary Hill and Steve Orlofsky)

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