NetApp Solid On SANs

Network Appliance executives say they expect to use momentum from a strong quarter and an expanded product line to become serious” SAN contenders. (See Net App Announces Earnings.)

“The goal is to increase our share in SAN,” said CEO Dan Warmenhoven on a conference call last night. “We will clearly establish ourselves as a serious contender in SAN.”

NetApp's revenue of $598 million last quarter increased 32 percent from the same quarter last year and 11 percent from the previous quarter. The quarter also ended NetApp's fiscal year. The company reported revenue of $2.07 billion for the year, a 29 percent increase from $1.6 billion last year.

NetApp’s gains follow lackluster numbers from other storage suppliers. (See Storage Financials Take a Dip.) Competitor EMC last month reported 14 percent year-over-year growth in revenues and a 6 percent sequential decrease. (See EMC Hiccups, Waits for Clariion.)

NetApp started as a pure NAS play, and NAS still accounts for most of its business. But Warmenhoven said sales that include block connectivity increased 74 percent the last fiscal year. Last quarter, 34 percent of NetApp's sales were for block-based storage -- up from 32 percent the previous quarter.NetApp is expanding its product line into areas that will make it more competitive against EMC. “We’re moving upward, outward, and downward,” said Warmenhoven. He was referring to the new FAS6000 highend system (an upward move), virtual tape library (VTL) and encryption products (an outward move), and an entry-level SMB appliance to follow later this year (a downward play). (See NetApp Scales Up and NetApp Readies Virtual Tape.)

“We are perceived as the more nimble alternative to EMC in the marketplace,” Warmenhoven asserted.

NetApp execs also say they are not impressed with EMC’s recent Clariion rollout, which EMC touted as a major architectural change to its midrange platform. (See EMC Uncages 4-Gig Clariions.) EMC blamed lukewarm revenue last quarter on customers waiting for the new Clariions.

“We view the Clariion launch as a hardware refresh,” NetApp president Tom Mendoza said. “There’s nothing new in software, in terms of reducing complexity and their entering new markets.”

NetApp will enter a new market when it launches its StoreVault appliance for SMBs. Warmenhoven expects the new appliance to start shipping in the second half of the year. He didn’t offer any product details, but the systems will likely be priced as low as $5,000. They will support NAS and iSCSI off the bat, with Fibre Channel connectivity to follow.The entry-level system will compete with EMC’s AX platform, but more directly with low-end NAS systems driven by Windows Storage Server 2003 R2 sold by Dell, Hewlett-Packard, and others.

“That’s where the battle lines will be drawn in a major war between Microsoft and NetApp,” says analyst Jon William Toigo of Toigo Partners International.

Not so, says Warmenhoven. He maintains Microsoft and NetApp were rivals when Microsoft first came out with NAS software a few years back, but that’s not the case now because of NetApp’s support for Microsoft software applications.

“Microsoft is sending out communications to the field saying they should view us as a partner,” he says. “We’ve come full circle. The Microsoft relationship is very positive at this point, and the issues we faced several years ago are now well behind us.”

On the software front, Warmenhoven said the first version of NetApp’s Data Ontap GX has completed beta testing and will ship this month as an option for the midrange FAS3000 and will soon be offered with the FAS6000. (See NetApp Nudges Closer to New OS.) GX, based on clustering technology acquired from Spinnaker Networks, is seen initially as a high performance computing (HPC) play. (See NetApp Annexes Spinnaker.)NetApp also promised data de-duplication capabilities soon. Data de-duplication transmits only data that has changed since the last backup, which speeds backups and requires less storage capacity.

“I don’t want to get too specific, but you’ll see de-dupe not only in our VTLs, but in our mainline Ontap stuff as well,” said Tom Georgens, EVP of the enterprise systems group.

— Dave Raffo, News Editor, Byte and Switch

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