NetApp 4Q: Channel Sales Fall, Clustered Data OnTap Transition Tough, Layoffs Coming

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NetApp on Wednesday said it will lay off some 500 employees, or about 4 percent of its head count, in the wake of a big hit to its fiscal 2015 fourth-quarter revenue and earnings.

Company executives blamed the drop in revenue and earnings squarely on an unexpectedly slow customer transition to its new Clustered Data OnTap-based storage solutions.

That slow transition impacted both direct and indirect channel sales, particularly on direct sales to commercial customers outside the company's top accounts and on sales via smaller indirect channel partners.

[Related: NetApp CTO Jay Kidd Plans To Retire, Says CTO Role Should Be Group Effort]

NetApp Chairman and CEO Tom Georgens, in a Wednesday conversation with CRN, said his company will make an incremental investment in both its direct and indirect sales strategies as a result.

"Sales via our top 10 partners, and via the overall majority of our partners, grew during the quarter," Georgens told CRN. "But we've seen those where they didn't make the investment in [Clustered Data OnTap] training and technology were not as successful. We need to invest more in helping them."

That resulted in a significant hit to NetApp's year-over-year channel sales for the fourth quarter, which ended April 24.

NetApp did not disclose channel sales for the quarter. However, the company said total indirect sales, which includes sales via both channel partners and OEM customers such as IBM and Fujitsu, accounted for 79 percent of total revenue for the fourth fiscal quarter of 2015, down from 83 percent of sales for the fourth quarter of fiscal 2014.

NetApp also said OEM sales, which is a component of the total indirect sales, in the fourth quarter of 2015 amounted to $101.7 million, down from last year's $109.8 million.

Given that total revenue for the fourth quarter of fiscal 2015 was reported at $1.54 billion, down from the $1.65 billion a year ago, sales via the channel, excluding OEM business, was $1.11 billion, down 11.5 percent from last year's channel sales of $1.26 billion.

Georgens told CRN it is important for NetApp to get more of its channel partners up to speed on Clustered Data OnTap in order to help them, and NetApp, as a whole, to grow revenue.

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