NetApp's Q3 Results: Innovation, Channel Drive Growth

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NetApp on Wednesday reported better-than-expected earnings for its third fiscal quarter thanks to growing strength of its branded business and its indirect channels.

The storage vendor also reported a relatively anemic revenue growth over last year, but noted that growth in sales of branded products, the part of its business most impacted by its channel partners, far outweighed a drop in OEM sales for the quarter.

NetApp also said it has acquired ionGrid, a small startup developer of iPhone and iPad applications for remotely accessing enterprise content.


[Related: Cisco, NetApp Beef Up FlexPod, ExpressPod For Branch-To-Cloud Scalability]

NetApp reported revenue for its third quarter of fiscal year 2013, which ended Jan. 25, of $1.63 billion, which the company said was in line with prior guidance. This was up about 4 percent from the $1.57 billion the company reported in the third fiscal quarter of 2012.

Third-quarter GAAP income was $158 million, or 43 cents per share, compared to the year-ago GAAP income of $120 million, or 32 cents per share. On a non-GAAP basis, income for the third quarter was $243 million, or 67 cents per share, compared to last year's $216 million, or 58 cents per share.

The non-GAAP earnings were higher than NetApp's previous guidance of 53 cents per share to 58 cents per share.

When asked why NetApp's revenue grew a mere 4 percent compared to the 8 percent year-over-year growth rival EMC reported last month, Nick Noviello, NetApp's executive vice president of finance and CFO, told CRN that NetApp's third-quarter branded business was up 8 percent over last year, while the company's OEM business was down 17 percent during the same period.

Tom Georgens, NetApp president and CEO, also talked during NetApp's financial analyst call about the 8-percent year-over-year growth in branded business, and he noted that last year it was the OEM business that was growing while the branded business was down.

"If anything, that [branded] business is probably the best it's been all year long," Georgens said.

The growth in NetApp's branded business stems from both technology innovations and a growing channel, Noviello said.

About 50 percent of NetApp's installed base is currently running the company's Ontap 8 operating system, and adoption of the latest version, Ontap 8.1, has been rapid, he said.

NEXT: Flash Storage, FlexPod Bright Spots For Third Quarter

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