NetApp 2Q: Channel Is Still The Growth Engine8:15 PM EST Wed. Nov. 14, 2012
NetApp on Wednesday reported growth in revenue and income for its fiscal second quarter 2013 that was pretty much in line with expectations, and it said that its sales through indirect channels are continuing to grow as a percentage of total revenue.
NetApp also said it acquired CacheIQ, the small developer of RapidCache NAS acceleration appliances that use a combination of DRAM and SSDs to cache data for important applications.
Nick Noviello, CFO and executive vice president of finance at NetApp, told CRN that his company overall had a good quarter.
"On the financial side, we continued to do what we said we will do," Noviello said. "There had been some doubts, but we did what we said."
That includes hitting roughly the midpoint of the company's expected revenue and gross margins but being above guidance on operation margins and earnings per share, he said.
For its fiscal second quarter 2013, which ended Oct. 26, NetApp reported revenue of $1.54 billion, up about 2 percent from the $1.51 billion the company reported for the second quarter of 2012.
GAAP income for the second quarter was $110 million, or 30 cents per share, down 36 percent from the $166 million, or 44 cents per share, NetApp reported during the second quarter of 2012. Non-GAAP net income was $189 million, or 51 cents per share, down 23 percent from last year's non-GAAP net income of $236 million, or 63 cents per share.
Tom Georgens, NetApp president and CEO, said his company's branded revenue during the quarter rose 4 percent over last year, while OEM revenue fell 9 percent.
NetApp also saw a 20 percent year-over-year rise in deals worth at least $1 million, and its largest customer now has over 1 exabyte in capacity using the company's storage arrays, Georgens said.
"In what has become a challenging economic environment, NetApp has had a very strong quarter," he said.
The channel continues to do well for NetApp, Noviello said. About 82 percent of NetApp's overall revenue came from channel partners, with about 34 percent of total revenue coming from its two distributors, Arrow and Avnet, which Noviello called an all-time high.
"NetApp is a partner-friendly company," he said. "Certainly, we're partner-friendly in our FlexPod and ExpressPod business and in our work direct with channel partners."
NEXT: FlexPod, Flash Storage, And Acquisition Strategies
This month marks the second anniversary of NetApp's unveiling of its FlexPod reference architecture with partner Cisco, NetApp's Noviello said.
The two partners currently have over 1,500 FlexPod customers, or about four times the number of customers a year ago. There are about 670 channel partners worldwide working with FlexPod, he said.
"It's a very interesting innovation story," he said. "And an interesting channel story."
However, Noviello said he was unable to talk about how many partners and customers have signed up for the ExpressPod reference architecture, which is a version of the FlexPod for SMB customers, as it was introduced only last month.
During the question-and-answer period of the fiscal second quarter 2013 conference call, NetApp's Georgens brushed aside questions about the company's flash storage technology strategy compared to competitors such as EMC and a multitude of startups.
Georgens noted that flash memory-based storage technology is already available for every NetApp Filer, and that his company is committed to making flash available everywhere customers require it.
"I do believe that flash will exist at every level of the (storage) hierarchy," he said. "But ... the real challenge is how to manage that over the enterprise."
Georgens also asked what EMC has that NetApp does not have in terms of flash storage technology. "There will be more flash substantiations going on," he said. "And you can expect us to be there."
When asked about NetApp's acquisition strategy, Georgens said to expect more small technology "tuck-ins" such as CacheIQ, and for them to happen at a faster pace. "And as we get bigger, you will see us do it more often," he said.
As for larger acquisitions, those are more opportunistic in nature, Georgens said. "They could happen or they could not happen," he said. "I wouldn't put any frequency number on that, or read into anything if we don't make an acquisition."
Looking forward, NetApp is expecting revenue for its fiscal third quarter 2013 to be in the range of $1.575 billion to $1.675 billion, or slightly up from the $1.6 billion it reported during its third fiscal quarter of 2012.
The company is also guiding third-quarter GAAP earnings per share from 29 cents to 24 cents, down from last year's 32 cents. Non-GAAP earnings per share are expected to be between 53 cents and 58 cents.
Investors were happy with NetApp. The company's share prices rose about 3 percent to $27.1221 per share during the trading day, and then jumped about 10 percent to $29.83 per share after a couple hours of after-hours trading.
PUBLISHED NOV. 14, 2012