NetApp Execs Talk Makeover, Fiscal Guidance, Software Plans

By James Rogers, March 11, 2008, 4:35

Lagging behind rival vendors at a time when many users are closing their corporate coffers, NetApp added more flesh to the bones of its recently announced image overhaul at its analyst day today.

"We have decided to change our brand and raise our profile," explained the NetApp CEO Dan Warmenhoven, describing NetApp's desire to boost its market presence at the expense of vendors such as EMC, HP, and IBM.

"I would argue that we have less than 10 percent market share, and we have plenty of room to expand," added the exec, explaining that NetApp is worryingly under-represented in the "Storage 5000" group of large enterprises.

NetApp execs on this morning's call described their annoyance at the fact that some 3,600 of these firms have never done any form of business with NetApp whatsoever."It frustrates the heck out of me that I walk into an account and they don't understand who we are at all," said Rob Salmon, the vendor's executive vice president of field operations.

NetApp's corporate re-branding, announced yesterday, is part of a long-term strategy to reverse this situation, and the vendor also revealed plans to ramp up its sales efforts today.

"We absolutely have to have more quota-carrying people on the street," Salmon said, although he would not confirm exactly how many new salespeople are coming on board.

"It's a fairly big investment -- it's larger than the investment we have made in the last several years," he said, explaining that NetApp will hire a total of 1,000 new employees this year.

NetApp is seen as being particularly vulnerable to an IT spending slowdown, which led to a barrage of questions from analysts today."The CEO of one of our competitors said that storage is 'recession-proof' in 2001, and that didn't prove true," replied NetApp COO Tom Georgens. "Make no mistake, IT spending is going to put a dampener on storage."

This skepticism was reflected in NetApp's fiscal 2009 guidance, which was published during today's call. Predicting revenues between $3.79 billion and $3.95 billion, NetApp is expecting a growth rate between 15 percent and 20 percent next year, which is just below the 21 percent predicted by analyst firm Goldman Sachs.

Despite the growth predicted, which could be viewed as a wee bit disappointing by firms like Goldman Sachs, at least one analyst has warned that an uncertain economic climate is the least of NetApp's worries.

"For NetApp, the challenges started well before the economic uncertainty, given customer concentration/saturation and competition," wrote Citi Investment Research analyst Paul Mansky in a note yesterday. "We do not view either as having materially changed over the past two to three months."

Although NetApp execs at today's event largely steered clear of product roadmaps, Georgens described more of the company's plans to merge the 7G and GX versions of its flagship OnTap software."Data OnTap 8 [is] what we're calling the converged release," he said, in response to an analyst's question. "You're going to see the next release of 7G soon, the next release of GX soon after, and OnTap 8 will be after that."

Whereas GX has been mainly targeted at high-performance computing customers, 7G has been aimed at enterprises with a mixed workload of transactional databases, Exchange, and other directories running on the same storage platform.

NetApp's Georgens refused to reveal a specific timeframe for Data OnTap 8, although there have been indications that the combined software product will be available sometime this year.

"As far as our development teams are concerned, [the products] are already converged," he said, adding that the combined software platform will offer a "greater degree of simplicity" for customers.

The rest of the meeting was tame -- in contrast with last year's analyst meeting, during which Warmenhoven surprised attendees by embarking on a rant against clustering specialist Isilon. The CEO avoided any reference to the vendor today.Instead, Warmenhoven was quizzed by analysts on the recent management changes at NetApp, which saw Georgens promoted to COO and the appointment of president Tom Mendoza to the newly created role of vice-chairman.

"Its only prudent for the company to keep moving to the next generation," replied Warmenhoven, adding that he has no intention of vacating the CEO's office. "I have no immediate plans. What you see is what you get."

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