NetApp: Channel Revenue Leads To Strong Q4

About 64 percent of revenue in the period came from the channel, compared to about 60 percent last year. "We were hoping to hit the two-thirds mark, but didn't quite make it," said Dan Warmenhoven, chairman and CEO of NetApp, of the growth in channel revenue.

NetApp, Sunnyvale, Calif., on Wednesday reported revenue for its fourth quarter, which ended April 28, of $938 million, an increase of 17 percent over the $801 million reported for the fourth fiscal quarter of 2007. Earnings for the quarter were flat at $90 million, or 23 cents per share, compared to $90 million, or 26 cents per share, last year.

For all of fiscal 2008, NetApp had revenue of $3.3 billion, up 18 percent compared to $2.8 billion in 2007. Income was $310 million, or 86 cents per share, compared to last year's $298 million, or 77 cents per share.

"It was a really strong finish to a really weak year," said Warmenhoven.

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The strong revenue growth came from a big increase in lower-end products, including its FAS2000 series of midmarket products, Warmenhoven told ChannelWeb on Wednesday.

NetApp has been phasing out its FAS3020 storage appliance, with customers going either for the midrange FAS2050 with room for up to 104 Tbytes of SAS, SATA, or Fibre Channel storage capacity, or the enterprise FAS3040 with up to 336 Tbytes of SATA or Fibre Channel raw capacity and eight 4-Gbps Fibre Channel ports.

"We're seeing the same ASP (average selling price) in our low-end products as in the lower end of our midrange products, but customers are adding more capacity," Warmenhoven said. "They're being sold more heavily configured than before."

Two-thirds of NetApp's revenue came from product sales in the fourth quarter, up about 7 percent compared to last year. However, Dan Warmenhoven, chairman and CEO of NetApp said, unit sales were up 23 percent, an indication of strong channle growth.

Unlike its larger rival, Hopkinton, Mass.-based EMC, NetApp has been relatively quiet in terms of acquisitions, Warmenhoven said. The company closed its acquisition of Onaro, a producer of storage service management software, in January. Prior to that, it acquired Topio, the developer of the ReplicatorX data replication software.

Warmenhoven said that he has a strong bias towards software companies as acquisition targets. "Acquiring hardware companies is not as interesting for us," he said. "We don't want to pick up another hardware platform. Software like Onaro and ReplicatorX are more interesting because they expand our product lines."

Looking ahead, NetApp said it expects revenue for the first quarter of fiscal year 2009 to be between $845 million and $875 million, compared to $689 million during the first quarter of last year. The company expects earnings of between 9 cents per share and 13 cents per share, about flat with the 9 cents per share earned last year.

Revenue for the full fiscal year 2009 is expected to be between $3.79 billion and $3.95 billion, with earnings of between 92 cents per share and 98 cents per share.