Channel Growth Significant Factor In NetApp's Q1 Revenue

Julie Parrish, senior vice president of global channel sales, said the company's channel business across the globe was a bright spot in the company's first fiscal quarter of 2012, which ended on July 29.

"This is especially true since we don't compete against our partners for services," Parrish said. "And we've always been 100-percent channel in the midmarket."

NetApp on Wednesday reported revenue for its first fiscal quarter reached $1.46 billion, up about 27 percent compared to the same period last year. The company also reported earnings of $139.5 million, or 34 cents per share, which was down 7 percent from last year.

About 76 percent of NetApp's total revenue in the first quarter came from indirect channels compared to 69 percent a year ago, the company reported. However, the apparent growth in indirect channels may be misleading as the total includes NetApp's OEM sales, which increased significantly with the company's acquisition of Engenio earlier this year.

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Parrish said NetApp's increased presence in the OEM market should not be seen as lessening the impact solution providers and distributors have on the company's sales.

"In North America, 68 percent of our sales were indirect last quarter," she said. "That was an all-time high. And that does not include Engenio. Three years ago, we were about 50 percent channel. This continues to be a significant shift for us in the Americas."

NetApp is also seeing a strong channel helping propel sales of the company's FlexPod Modular Data Center Solution, an architecture that provides a large degree of flexibility in configuring storage solutions based on NetApp storage, Cisco networking, and VMware virtualization technology.

NetApp had nearly 350 FlexPod customers in the first fiscal quarter, a big jump from the 150 customers it counted in the prior quarter, Parrish said.

Because FlexPod requires integration of the technology from various vendor partners based on customer requirements, it's an all-channel sale, she said. Most of the integration is done by NetApp's distributors, Avnet and Arrow, while solution providers do some integration in certain cases as well as any value-added services on top of the architecture.

"There is no option for us to sell it directly," she said. "The bulk of our work with FlexPod is on the integration points. We want to make it easy for partners."

During Wednesday's analyst conference call to discuss the first quarter financial reports, Tom Georgens, NetApp president and CEO, called out the importance of the channel to his company.

"We believe that we have the most diversified go-to network in the industry, and the best relations with our channel partners of all our competitors," Georgens said.