NetApp Reports Strong 3rd Quarter, But Channel Sales Somewhat Soft

The Sunnyvale, Calif.-based networked storage vendor reported revenue for the quarter of $412.7 million, up 39 percent compared to the $297.3 revenue it reported for the same quarter last year.

Net income rose sharply to $60.1 million, or 16 cents per share, up 50 percent over the $40.2 million, or 11 cents per share, reported a year ago.

The company generated $148.5 million in cash from operations, a record, according to Steve Gomo, executive vice president of finance and CFO for the company.

Even better, Gomo said, the company's deferred revenue for the third quarter was up 15 percent over the second quarter, and up 65 percent over the same period last year.

Headcount at NetApp grew by 264 people during the quarter, giving the company a total of 3,519 employees at the end of the quarter, said Gomo.

For the current quarter, Gomo said he expects revenue to be up 6 percent to 9 percent over the third quarter, and up 30 percent to 34 percent over last year's fourth quarter.

For all of fiscal year 2005, Gomo said revenue is expected to hit $1.58 billion to $1.59 billion, up 35 percent to 36 percent over 2004. Earnings per share are expected to be in the 57 cents to 59 cents range, compared to analysts expectations of 62 cents per share, according to Thomson Financial.

Dan Warmenhoven, CEO of NetApp, told CRN indirect sales accounted for about 50 percent of NetApp sales in the third quarter, down from about 55 percent in the preceding quarter. This downturn came from a drop in federal sales after the end of the government's fiscal year, as well as a softness in the Japanese market, which is primarily served by indirect channels, he said.

However, sales via NetApp's two distributors in the U.S., Arrow and Avnet, accounted for 9 percent of the company's revenue, up from 8 percent last quarter, said Warmenhoven.