Network Appliance: Last Quarter Soft, This Quarter Flat

Officials of Network Appliance on Tuesday said the NAS vendor is still profitable, but a slide in European sales and lingering effects from the e-commerce slowdown ate at revenue and profits, and led to the company's first reduction in headcount.

Revenue for Network Appliance's first quarter of fiscal year 2002 were $200.4 million, down over 13 percent when compared to the $231.2 million recorded in the same period a year ago.

Income for the company, based here, was $0.5 million, or break-even per share, compared with $5.0 million, or $0.01 per share, for the same period last year.

As a result, Network Appliance will lay off about 200 of its 2,400 employees worldwide.

The headcount reduction is a result of decreasing revenue, says Dan Warmenhoven, CEO. "This is the first reduction in company history," he says.

Customer orders rose at the end of the quarter, says Warmenhoven, but he declined to call that a trend. Instead, he says customers have gone through more budget revisions than ever in the past, with middle managers making decisions only to find that the expected funds disappeared. However, he says, the budgets are now stabilizing.

About 61 percent of the company's total revenue came from North America, slightly up from last year, says Jeff Allen, CFO and executive vice president of Finance and Operations. European revenue as a part of total revenue fell to 24 percent, down from 28 percent last year, he says.

Add-on software accounted for about 20 percent of sales, says Allen.

While Network Appliance is encouraged by progress in the enterprise market, the continuing softness in Europe and the Internet sector will hold revenue growth for second quarter to between zero and five percent says Allen.