NetApp: Fiscal 2Q09 Financial Results
Revenues up 15%, profit dropping 41%
This is a Press Release edited by StorageNewsletter.com on November 13, 2008 at 3:36 pm| (in US$ millions) | 2Q08 | 2Q09 | 6 mo. 08 | 6 mo. 09 |
| Revenues | 792.2 | 911.6 | 1,481.4 | 1,780.4 |
| Growth | +15% | +20% | ||
| Net income (loss) | 83.8 | 49.2 | 118.1 | 86.9 |
NetApp reported results for the second fiscal quarter of 2009. Revenues for the second fiscal quarter of 2009 were $912 million, an increase of 15% compared to revenues of $792 million for the same period a year ago.
For the second fiscal quarter of 2009, GAAP net income was $49 million, or $0.15 per share1 compared to GAAP net income of $84 million, or $0.23 per share for the same period in the prior year. Non-GAAP2 net income for the second fiscal quarter of 2009 was $92 million, or $0.28 per share, compared to non-GAAP net income of $116 million, or $0.32 per share for the same period a year ago.
Revenues for the first six months of the current fiscal year totaled $1.78 billion, compared to revenues of $1.48 billion for the first six months of the prior year, an increase of 20% year over year.
GAAP net income for the first six months of the current fiscal year totaled $87 million, or $0.26 per share, compared to GAAP net income of $118 million, or $0.32 per share for the first six months of the prior fiscal year. Non-GAAP net income for the first six months of the current fiscal year totaled $168 million, or $0.50 per share, compared to non-GAAP net income of $192 million, or $0.52 per share for the first six months of the prior fiscal year.
“NetApp produced solid revenue and earnings results despite a challenging economic environment,” said Dan Warmenhoven, chairman and CEO. “More and more customers are turning to NetApp to drive down their storage costs by increasing their storage utilization. We expect NetApp’s unique storage efficiency offerings to resonate well with customers, particularly during periods of constrained IT spending.”
Outlook
Given the reduced visibility caused by the recent changes in the macroeconomic environment, NetApp will not be providing formal revenue guidance for the third quarter of fiscal year 2009.
- NetApp estimates non-GAAP gross margins for the third quarter of fiscal year 2009 to be substantially the same level as reported in the second quarter of fiscal year 2009.
- NetApp estimates non-GAAP operating expenses for the third quarter of fiscal year 2009 to be roughly flat from the operating expenses reported in the second quarter of fiscal year 2009.
Quarterly Highlights
In the second quarter of fiscal year 2009, NetApp introduced new solutions that continue to help customers transform their data center architectures through higher efficiencies and asset utilization, greater power and space savings, and innovative data management techniques. NetApp also received many industry awards that recognize its leadership in quality, innovation, and service in the storage market.
NetApp launched a global program that offers customers a guarantee that they will use 50% less storage in their virtual environments with NetApp® compared to traditional storage. NetApp wants to assure customers who choose NetApp and leverage its unique storage efficiency technologies that they will reduce their overall storage usage while improving performance.
During the second quarter, NetApp announced that it will be the first storage vendor to offer native Fibre Channel over Ethernet (FCoE) SAN storage solutions. FCoE support extends NetApp’s unified storage architecture, enabling customers to address changing business needs and opportunities with flexible data access across all protocols.
NetApp announced the availability of deduplication on NetApp Virtual Tape Library (VTL) systems, enabling customers to lower the disk capacity required to back up any storage system, including EMC and HP, up to 95%.
During the quarter, NetApp announced the NetApp GetSuccessful Partner Enablement Program to help partners maximize strategic opportunities and distinguish themselves with their customers. The program is a new benefit of NetApp’s current VIP Partner Program and complements the Authorized Professional Service Provider and the Virtualization Specialization programs announced earlier this year.
NetApp continues to receive industry recognition from third parties. During the quarter, NetApp received the following awards:
- Diogenes Labs’ Storage Magazine Quality Awards for the Enterprise Arrays category (Storage)
- 2008 InformationWeek 500 (InformationWeek)
- Penton Media’s Windows IT Pro 2008 Community Choice Awards (Windows IT Pro)
- Service Management Achievement Award for Executive Stewardship (Aberdeen Group)
- 2008 Rising Star Award (Global Technology Distribution Council), Learning in Practice Awards (Chief Learning Officer magazine)
- ‘Best Places to Work’ in Research Triangle Park 2008 (Triangle Business Journal)
Comments
Here are some abstracts of the conference call transcript:
CFO Steven Gomo
"Product revenue, of $570.0 million, was up 4% sequentially and up 5% year-over-year accounting for 63% of total revenue. Add-on software, which is a subset of product revenue, was 20% of total revenue. Revenue from software entitlements and maintenance was $153.0 million, or 17% of total revenue. Software E&M was up 6% sequentially and 30% year-over-year. Total software, the combination of add-on software and software E&M was 37% of total revenue compared to 36% in Q1 and 40% in Q2 of last year.
"Revenue from services was $188.0 million and 21% of total revenue, up 7% sequentially and up 41% over Q2 of last year. Service revenues are comprised, primarily of hardware maintenance support and professional services. Revenue from the largest component, maintenance contracts, increased 6% sequentially and 39% year-over-year. Professional services increased 9% sequentially and 40% over last year.
"During the quarter headcount increased by 381 people on a net basis ending up with 8,380 employees."
President & COO Thomas Georgens
"In Q2 EMEA contributed 32% of revenue, up 23% over last year. Asia Pac was up 3% year-over-year to 11% of total revenue. The Americas contributed 57% of revenue, up 13% year-over-year. Within the Americas the federal team had a record quarter contributing 16% of total revenue.
"The indirect channel also achieved a record 67% of revenue primarily due to increase in business from federal and our distributors, Arrow and Avnet, growing to 21% of revenue with Arrow at 11% and Avnet at 10%. Our continued channel momentum is a result of investments of the channel and quota-bearing reps we started over a year ago. IBM was 4% of revenue this quarter.
"Entry-level units were up 45% and high-end units were up 16%. Our new mid-range product family, the 3100 Series, showed solid traction this quarter but has not yet fully offset the shift that occurred from the older 3000 Series to the newer 2000 family. Though down modestly year-over-year, revenue from the mid-range still represents over 50% of systems revenue.
"Our de-duplication continues to be the most rapidly adopted feature in the history of the company with over 7,600 more licenses downloaded this quarter and nearly 21,000 licenses to date."
CEO Daniel Warmenhoven
"Given these facts, we are slightly more optimistic than Cisco about the future. Our best guess is that Q3 revenue will be flat to slightly up from this past quarter. Given the high degree of uncertainty in that guess, we do not feel it would appropriate to provide an EPS forecast."
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