NetApp Reports Strong 2Q, Downplays Concerns About EMC's Isilon Deal

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Storage vendor NetApp on Wednesday reported strong revenue and earnings growth for its second fiscal quarter of 2011, and sloughed off any concerns the industry might have over EMC's pending acquisition of Isilon.

NetApp's continued growth in channel sales and a strong push in commercial and government sales in the Americas made the quarter one of the storage company's best ever, company executives said during the conference call following the release of its quarterly financials.

For NetApp's second fiscal quarter 2011, which ended Oct. 29, the company reported revenue of $1.2 billion, up 33 percent over the $910 million the company reported for the same period last year.

NetApp earned $165 million, or 42 cents per share, during the second fiscal quarter, up from the $96 million, or 27 cents per share, it reported a year ago.

Government and U.S. sales were the primary drivers behind NetApp's revenue growth, said Tom Georgens, president and CEO.

Government sales during the quarter, including federal, state, and local, grew 59 percent compared to last year, with the bulk of those sales coming from North America. Overall revenue from sales in the Americas rose 45 percent over last year, Georgens said.

Storage product sales during the quarter amounted to $780 million, up 49 percent over last year. Software entitlements and maintenance revenue hit $177.9 million, up 5 percent, while services revenue hit $249.5 million, up 16 percent.

When asked about the large growth in product sales vs. the small growth in its other parts of the business, particularly professional services, Georgens said that NetApp is primarily a hardware company, and that it has no interest building the infrastructure to support a professional services business and compete with its channel partners.

"We'll enable (our partners) to provide the services," he said.

Georgens said that sales to solution providers through distributors Arrow and Avnet now account for about one-third of revenue. NetApp also deals with some channel partners direct. He also said that CDW has become NetApp's single largest reseller in only two years, while IBM's sale of NetApp products are still growing.

In addition, Georgens said, NetApp is seeing strong growth in its services provider channel.

"Overall, we believe NetApp has the most diversified channel in the industry," he said.


Next: NetApp Responds To EMC's Planned Buy Of Isilon

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