NetApp Q3 Profit Triples

Network Appliance Inc. (Nasdaq: NTAP), late Tuesday announced its third-quarter net income tripled from a year earlier and attributed the growth to its FAS 900 unified storage and NearStore backup products (see NetApp Posts Higher Q3 Profit and NetApp Has 100 NearStore Users).

For the quarter ended Jan. 24, NetApp reported net income of $19.7 million, or six cents a share, compared with $7 million, or two cents a share, a year earlier. Revenue jumped 15 percent to $228.5 million from $198.3 million.

Our accelerating growth rate demonstrates the success we've achieved in expanding our customer base, strengthening our partnerships, and the strong market reception of our unified storage and NearStore families," said Dan Warmenhoven, CEO of Network Appliance, on a conference call Tuesday evening (see HDS OEMs NetApp: Big Deal?).

Almost 50 percent of filer revenue in the quarter came from the FAS 900 unified SAN/NAS system which continued its “outstanding acceptance” in the industry, said Warmenhoven. “It’s the fastest takeup of any product in our history."

The FAS 900 is a storage array that supports both SAN-attached and network-attached storage in a single system (see NetApp Does the Storage Two-Step).Unified storage wins for the third quarter included: The United States Navy, North Texas Tollway Authority, China Unicom, Mitsubishi Heavy Industries Ltd., and WesternGeco. Other key enterprise customer wins are ATAC, Group Peugeot Citroen, Inmarsat, Integris Health, John Deere, MFS Investment Management, Renault F1 Team, Wells Fargo Inc., and Weta Digital Effects.

NearStore, NetApp’s near-line backup product launched a year ago, has over 4 petatypes installed in the field, Warmenhoven said.NearStore offer faster access to data than is offered by tape storage gear (hence the name "NearStore"), while falling below the cost of full-blown NAS appliances (see NetApp's Backup Plan).

NearStore customer wins in the quarter included: TRW, Whitehead Institute, Norsk Hydro, and a major defense agency.

Gross margins of 61.3 percent were lower than 61.9 percent estimated due to lower hardware and service margins. NetApp said its lower hardware margins are an indicator of its continued growth into large enterprise accounts. "Our systems gross margin came down...but software is a larger percentage of revenue as bigger customers want more added value which comes from software," said Warmenhoven. "All I care about is that our overall corporate gross margin continues to grow."

NetApp expects its fourth-quarter revenue to rise 2 percent to 6 percent from $228.5 million in the third quarter, implying revenue of $233 million to $242.2 million.“We are not counting on an economic recovery, we are gaining share,” Warmenhoven said.

— Jo Maitland, Senior Editor, Byte and Switch