NetApp: Fiscal 4Q11 Financial Results
Now at more than $5 billion per year
This is a Press Release edited by StorageNewsletter.com on May 26, 2011 at 3:13 pm| in US$ millions) | 4Q10 | 4Q11 | FY10 | FY11 |
| Revenues | 1,172 | 1,428 | 3,931 | 5,123 |
| Growth | 22% | 30% | ||
| Net income (loss) | 145.1 | 160.6 | 400.4 | 673.1 |
NetApp, Inc. reported results for the fourth quarter and fiscal year 2011, which ended April 29, 2011.
Revenues for the fourth quarter of fiscal year 2011 totaled $1.428 billion compared to revenues of $1.172 billion for the same period one year ago.
For the fourth quarter of fiscal year 2011, GAAP net income was $160.6 million, or $0.40 per share compared to GAAP net income of $145.1 million, or $0.40 per share for the same period a year ago. Non-GAAP net income for the fourth quarter of fiscal year 2011 was $236.7 million, or $0.59 per share, compared to non-GAAP net income of $183.1 million, or $0.50 per share for the same period a year ago.
Revenues for fiscal year 2011 totaled $5.123 billion compared to revenues of $3.931 billion for fiscal year 2010. GAAP net income for fiscal year 2011 was $673.1 million, or $1.71 per share, compared to GAAP net income of $400.4 million, or $1.13 per share for fiscal year 2010. Non-GAAP net income for fiscal year 2011 totaled $865.7 million, or $2.20 per share, compared to non-GAAP net income of $533.0 million, or $1.51 per share for fiscal year 2010.
"NetApp delivered 30% revenue growth, 38% growth in cash from operations and over $1B in non-GAAP operating profit during fiscal 2011. We achieved the largest market share gains in our history and closed a record number of million dollar deals, demonstrating our momentum in the market as enterprise customers increasingly choose NetApp as their vendor of choice for storage virtualization and cloud deployments," said Tom Georgens, president and CEO. "Together with our partners we create unmatched IT efficiency and flexibility with innovative solutions that solve the biggest and hardest problems in accessing and protecting business-critical information."
In the fourth quarter of fiscal year 2011, NetApp adopted mandatory new accounting standards related to revenue recognition for transactions originating or materially modified in fiscal year 2011. It implemented these standards retrospectively to the beginning of fiscal year 2011; therefore the full year and previously reported quarterly results for fiscal 2011 have been adjusted to reflect the adoption of these new standards.
Outlook
- NetApp estimates revenue for the first quarter of fiscal year 2012 to be approximately $1.500 billion, plus or minus 3%, which equates to approximately 2% to 8% sequential revenue growth and approximately 26% to 34% year over year revenue growth.
- NetApp estimates that first quarter fiscal year 2012 GAAP earnings per share will be approximately $0.31 to $0.36 per share. NetApp estimates that first quarter fiscal year 2012 non-GAAP earnings per share will be approximately $0.52 to $0.57 per share.
- NetApp estimates that share count for the first quarter of fiscal year 2012 will increase to approximately 410 million shares, including an estimated 16 million shares from the company’s outstanding convertible notes and 9 million shares from outstanding warrants. Share count does not include the company’s outstanding note hedges that are expected to offset 80% of the dilution from the convertible notes at maturity or conversion.
- The above guidance reflects the new accounting standards related to revenue recognition.
Business Highlights
In its fourth quarter of fiscal year 2011, NetApp continued to demonstrate its commitment to providing customers and partners with the solutions and technologies that are foundational to their success. During the quarter, NetApp entered into a definitive agreement to purchase the Engenio external storage systems business from LSI Corporation to enable NetApp to expand its addressable market and generate greater revenue growth with a strategic storage platform intended to capitalize on new high-growth opportunities for big-bandwidth and high-performance applications. Additionally, NetApp continues to enable enterprises to make the transition to a flexible and shared IT infrastructure and once again received numerous awards honoring its product innovation, executive leadership, and culture. Highlights included the following:
The purchase of the Engenio external storage systems business provides NetApp with a storage platform that is complementary to its existing NetApp Data ONTAP platform and is targeted to address emerging customer needs around big-bandwidth and high-performance applications such as full-motion video and digital video surveillance. The purchase will help enable NetApp to capitalize on the expected growth within this emerging market and help it further diversify its channels to market through a proven, mature OEM business.
NetApp Enables Transition to a Shared IT Infrastructure
NetApp helps Suncorp Group spark innovation on shared IT infrastructure. The Suncorp Group, a provider of diversified financial services and one of Australia’s largest companies, recently made a strategic bet on storage to fuel its growth and transformation as a company. With NetApp as its storage foundation, Suncorp migrated 80% of its entire IT environment to a shared infrastructure, creating a culture of innovation throughout the company and enabling it to scale rapidly.
NetApp enables service providers to deliver cloud services. Expanding on its strategy to broaden and leverage its diverse pathways to reach customers, NetApp is collaborating with many of its service provider partners to deliver a range of innovative cloud services that help customers make the transition to a flexible and efficient shared IT infrastructure. These service providers are part of the industry’s first NetApp Partner Program for Service Providers, which helps partners increase their business and take advantage of the market shift to cloud services.
Milestones and Awards
- NetApp named one of the Best Places to Work around the globe, ranking as the #2 best company to work for in Canada for a second consecutive year and #8 in Japan in the ‘Fewer than 250 Employees’ category.
- NetApp gains impressive channel leadership recognition. NetApp was named a 2011 CRN Channel Champion in the Enterprise Network Storage category, amplifying the company’s focus on enabling its partners’ success. Additionally, Julie Parrish, senior vice president of Global Partner Sales; Todd Palmer, vice president of Americas Channels; and David Drahozal, director of Channel Sales for U.S. Public Sector, were named Channel Chiefs by Everything Channel’s CRN.
- NetApp positioned in Leaders quadrant. Gartner, Inc. placed NetApp in the Leaders quadrant for midrange and high-end NAS solutions. Gartner asserted that vendors in the Leaders quadrant "have the highest scores in their ability to execute and completeness of vision."
Comments
NetApp is in storage only. With $1.428 billion in total revenues this quarter, it corresponds to 42% of EMC storage sales - including services - in the three month period ended in March 2011 and to 40% for their last fiscal year. The 1Q11 figure from EMC was down 6% sequentially with the addition of Isilon. For NetApp, quarterly growth is 13% with Engenio and the company continues to grow much faster than its competitor in storage.
Abstracts of the earnings call transcript:
Steve Gomo, CFO:
"This sequential growth rate corresponds to the high end of our guidance range for revenue.
"Product revenue grew 14% sequentially to about $960 million, the second highest sequential growth rate in the past 5 years.
"Our total units shipped were up 29% year-over-year despite material constraints through the middle of the quarter. The material constraints contributed to a back end loaded shipment profile which in turn, drove our accounts receivables days sales outstanding to 47 days. With the material supply constraints solved for Q1 FY '12, we are expecting a more linear shipment quarter and a reduction in DSO to the high 30s in Q1.
"If you look at the OEM business that Engenio brought with us, in the first quarter, it's going to be about $140 million, plus or minus 10%."
Tom Georgens, president and CEO:
"With a record number of deals over $1 million and a record number of deals over $5 million, our Q4 results demonstrated our continued momentum in the market and expanded presence in some of the largest data centers around the world.
"Our platform refresh of the 3000 and 6000 family in November continued its strong momentum during Q4. The 6000 family saw units increase 86% sequentially and 64% year-over-year. The 3000 family grew 39% sequentially and 51% year-over-year. The 2000 family was up 11% year-over-year and down 4% sequentially, as some demand moved up to the newer 3200 platforms. The V-Series, which continues to be a compelling vehicle for enabling the introduction of Data ONTAP into new accounts, grew 37% sequentially and 35% year-over-year.
"In fairness, the 3000 compares were modestly assisted by ending backlog from last quarter due to parts availability issues. To be more specific, the supply constraints were on an I/O expansion module, a new capability of the 3000 family that enables the installation of additional feature cards. The major driver of this demand was the customer preference for additional Flash Cache modules which increased about 200% from Q4 of last year and are now attached to 2/3 of the 6200s and 1/3 of the 3200s.
"From a geographic year-over-year growth perspective, EMEA grew 15%, Asia Pacific grew 21%, Americas grew 14% and the U.S. Public Sector an incredible 73%.
"Our reference to build the most diversified channels to market continued to have significant impact on the business in Q4, as our indirect business grew to a record 75% of revenue. Our distribution partners, Arrow and Avnet, grew 39% year-over-year to 31% of our total business. Our business with Fujitsu finished the year strongly with 18% growth over last Q4, and our newly acquired Engenio business expands and creates new OEM partnerships. Examples are Teradata in the data warehousing and analytics space and at the entry level and server test segments of the market, the IBM and Dell relationships will enable us to achieve product volumes in these price bands that cannot be attained through branded channels of standalone storage companies.
"IBM has introduced products that are competitive with both Engenio and with the NetApp offerings over the years, yet this business still continues to grow, it still continues to be robust.
"In fact, if you look at our IBM OEM business now, in Q3, that's when they peak as a percentage of our revenue. And in the quarter we just finished is when they're at the bottom."
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