) creates innovative storage and data management solutions for
small and medium-sized companies around the world. It competes
mainly with EMC (
), IBM (
), HP (
) and Dell (
) in the external disk storage systems market.
Cloud Computing, also known as IT as a Service (ITaaS),
is increasingly being adopted as a way for IT organizations to
decrease costs, improve efficiency, and enhance business
agility. We believe that NetApp is very well positioned to
benefit from this surge in demand of Cloud Computing. We currently
Trefis price estimate of $64 for NetApp's stock
, about 22% above its current market price.
Transition to Cloud
IT budgets in most organizations have historically remained
stubbornly flat, but demands on IT continue to rise year over year.
Increasing requirements for business agility, reducing costs, and
improving efficiencies has forced organizations to implement
private clouds. Cloud Computing enables IT departments to
overcome the short comings of traditional environments - built and
optimized to run specific applications, delivering poor server and
storage utilization (on average, 10-15% utilization for servers and
30-40% for storage).
Cloud computing derives its usefulness from virtualization. Once
the IT infrastructure is virtualized, firms have the foundation of
a shared IT infrastructure of pooled computer, network, and storage
resources to delivery capacity on demand and meet fluctuations in
resource requirements. The improved ability to scale infrastructure
up or down to meet dynamically changing and new business needs
increases business ability while shared IT infrastructure not
only reduces hardware acquisition costs but also results in
significant savings in IT staffing costs and data center space,
power, and cooling. Increased efficiency results from the
standardization, better resource allocation and utilization,
simplified and automated provisioning processes, and overall
operational efficiency improvements in the automation of all
aspects of IT management.
In a recent IDC survey of IT decision makers, 44% of respondents
indicated that they were considering implementing a private cloud-a
cloud deployment contained within the corporate firewall to meet
the needs of internal customers.
How NetApp Benefits
NetApp can benefit in multiple ways from demand for cloud
(1) Higher storage market share
NetApp has been helping companies evolve to a private cloud
infrastructure since before the term cloud became popularized.
NetApp private cloud solutions are based on its industry-leading
data and storage management technology.
We believe NetApp's share in storage market will rise as firms
adopting Cloud Computing will increasingly turn towards NetApp, one
of the pioneers of the industry with proven products and expertise,
in order to effect a massive change in their IT infrastructure that
will help them remain competitive.
(2) Higher software licenses and demand for consulting
In addition to witnessing increasing hardware sales, NetApp will
see a surge in software license and maintenance as well as support
and consulting services revenues, which are dependant on hardware
sales, given the newness of the technology provided.
We estimate there could be a upside of 20% upside to the
Trefis price estimate for NetApp's if its share in the storage
market increases to 16% by 2017 as against our current estimate
complete analysis for NetApp's stock is here